The Ethiopian Capital Market Authority (ECMA) has officially registered and approved the Collective Investment Schemes (CIS) Directive, marking a significant shift in the country's capital market. This development allows everyday citizens to participate in the capital market through collective investment tools, broadening accessibility and opening up opportunities for the general public to contribute to the nation's economic growth. The directive completes the legal framework governing various collective investment structures.
The Collective Investment Schemes Operations Directive No. 1150/2026 focuses on six types of collective investment schemes: money market funds, mutual funds, real estate investment funds, exchange-traded funds (ETFs), alternative investment funds, and special-purpose funds. The directive includes key structural safeguards, such as provisions mandating that scheme assets be held by an independent custodian separate from the manager, alongside rules requiring continuous reporting to investors. These measures aim to ensure robust investor protection.
According to ECMA Director General Hana Tehelku, the directive is a major step toward channeling Ethiopian savings into productive investments through professional management and robust investor protection. The mechanism will allow individuals, such as teachers, farmers, or small business owners, to entrust their savings to licensed professional managers. This development is expected to bridge existing gaps by creating accessible investment instruments that do not require individuals to directly navigate the securities market.
The governance requirements within the directive reflect international best practices tailored to Ethiopia's local context. Board members of scheme managers must possess core competencies in fund management, financial services, law, auditing, risk management, and regulatory compliance. Furthermore, independence requirements prohibit close affiliations with entities that could pose conflicts of interest. These measures aim to ensure the integrity and transparency of collective investment schemes.
The inclusion of real estate investment funds, similar to REIT structures found in other markets, will enable investors to participate in large-scale property developments while providing developers with expanded sources of capital. Money market funds will likewise offer savers flexible alternatives beyond traditional bank deposits. This development is expected to increase accessibility and provide more investment options for the general public.
The Authority stated that it will regulate registered schemes and their service providers, affirming its readiness to collaborate with managers, custodians, investors, and other stakeholders to build a trusted collective investment market. The ECMA's role as the sole regulatory body for the Ethiopian securities market, established by the Capital Market Proclamation No. 1248/2021, ensures a coordinated approach to overseeing the collective investment framework.
The introduction of the Collective Investment Schemes directive is expected to have a positive impact on Ethiopia's capital market, providing new opportunities for everyday investors to participate in the nation's economic growth. The directive's implementation will be closely monitored, and its effectiveness in achieving its objectives will be assessed in the coming months.
Key points
- The Collective Investment Schemes directive allows everyday citizens to participate in the capital market through collective investment tools.
- The directive focuses on six types of collective investment schemes, including money market funds and real estate investment funds.
- The ECMA will regulate registered schemes and their service providers to ensure a trusted collective investment market.
