article review on financial market in ethiopia

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The Oxford Handbook of the Ethiopian Economy

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10 Ethiopian Financial Sector Development

Yohannes Ayalew Birru, PhD, is the vice governor and chief economist of Ethiopia’s central bank (National Bank of Ethiopia). He is a member of the board of directors of the National Bank of Ethiopia and chairman of the African Trade Insurance (ATI), among other responsibilities. He has over twenty-eight years of cumulative experience in the areas of finance, monetary policy, and economic growth. He holds a PhD in economics from the University of Sussex.

Published: 11 February 2019
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Financial sector development has played a key role in Ethiopia’s economic development, particularly since the launching of the first Five-year Growth and Transformation Plan in 2010. The gradualist approach that Ethiopia followed in reforming its financial sector seems to have borne fruit as no single commercial bank has gone bust so far, unlike the case in neighbouring countries. Though Ethiopia’s financial sector growth was following output growth in the first two phases, government has started to play a key role in accelerating the sector’s growth through active interventions, such as encouraging branch expansion, and introduction of new financial instruments such as the Grand Ethiopian Renaissance Dam Bond, a housing saving scheme, and the private pension fund. Consequently, the number of bank branches expanded from 681 to 4,257 between 2010 and 2017 while the deposit-to-GDP ratio went up from 25.9 per cent to 31.4 per cent in the same period.

10.1 Introduction

Ethiopia has become one of the few countries in Africa that has built resilience to both internal and external headwinds and has been able to sustain a high-growth high-investment scenario. Even after the 2013 international commodity prices collapse and the 2016 drought, the country managed to sustain economic growth at near pre-commodity-price-collapse levels despite experiencing unprecedented declines in almost all prices of its major export goods and a major drought that affected about 14 million people nationwide (IMF 2017 ). Such resilience could partly be attributable to the financial sector, which played a key role in making the country’s transition to a high-investment high-growth trajectory possible, without letting the hard-won macroeconomic stability be sacrificed. 1 For instance, as investment demand surged from 24.3 per cent of GDP in 2003 to 39.0 per cent in 2017, domestic banks expanded total outstanding credit as a percentage of GDP from 20.8 to 31.0 per cent in the same period, which was largely financed by deposits mobilization. Banks managed to expand their deposit mobilization capacity from 27.8 per cent of GDP in 2003 to 31.4 per cent in 2017.

Nonetheless, by the standards of East and South-east Asian countries during their heyday of growth, Ethiopia lags behind in terms of financial deepening and addressing the challenges of domestic savings mobilization. For instance, between 1970 and 1984, Malaysia managed to increase its M2/GDP ratio from 40.9 per cent to 102.1 per cent and its savings-to-GDP ratio from 26.9 per cent to 32.6 per cent, while in South Korea, domestic savings surged from 16.6 per cent in 1970 to 33.1 per cent in 1984. On the other hand, Ethiopia suffered from demonetization between 2004 and 2010, as commercial banks continued to shed non-performing loans that were mounting up in the pre-2003 period and the tight monetary policy pursued between 2006 and 2008 following the international food price crises. As a result, the broad money-to-GDP ratio declined by more than 12 percentage points in just six years, between 2004 and 2009, from 37.5 per cent to 25.4 per cent. During this period, the domestic savings-to-GDP ratio remained at its lowest level, hovering around 9 per cent on average. The trend was reversed with the launching of the first Growth and Transformation Plan (2011–15) in 2011 and the government started to play an active role in financial sector development. Consequently, the broad money-to-GDP ratio and domestic savings-to-GDP ratio surged to 31.4 per cent and 24.1 per cent in 2017, respectively.

Performance in the Eastern Africa region has been mixed. Kenya, which managed to increase its broad money-to-GDP ratio from 38.2 per cent in 2002 to 42.2 per cent in 2017, failed to translate its achievement in financial deepening into domestic savings, unlike its East Asian counterparts. Kenya’s gross domestic savings-to-GDP ratio remained one of the lowest in the region, hovering around 8 per cent in the last twenty years, between 1996 and 2016. In contrast, Tanzania registered significant improvements both in financial deepening and in translating the latter into domestic savings. Between 2000 and 2015, the broad money-to-GDP ratio increased from 17.1 per cent to 24.3 per cent while the gross domestic savings-to-GDP ratio surged from 10.1 per cent to 23.2 per cent (World Bank 2017 ).

Against this background, this chapter analyses the recent development of the financial sector in Ethiopia, particularly the banking sector, and its contributions to macroeconomic stability and growth. The chapter focuses on the post-2003 period, the landmark year when Ethiopia embarked on a rapid economic growth trajectory. Section 10.2 presents a brief historical background of the financial sector, followed by an outline of the theoretical underpinning behind the Ethiopian financial sector reform strategy. Developments of the financial sector in the last twenty-six years since the initial reform in 1992 are explored in Sections 10.3 – 10.6 , which also present an analysis of the financial sector’s contribution to macroeconomic stability and economic growth. Section 10.7 offers conclusions.

10.2 Historical Background

Prior to 1992, the financial sector was part of a command economy system. Zeidy ( 1993 ) noted that monetary and exchange rate policies were relegated to secondary importance. The National Bank of Ethiopia directly determined the level and structure of the interest rate and exchange rate. Credits were allocated according to the central plan. The financial sector was closed to the private sector until 1994. Before the partial opening of the sector there were only three government banks, one commercial and two specialized banks—the Housing and Saving Bank and Agricultural and Industrial Bank of Ethiopia (now the Development Bank of Ethiopia). Outside the banking system, the financial sector included only one government-owned insurance company and a post office 2 until 1995.

Unlike most other sectors, after the overthrow of the Derg and the formation of the EPRDF-led transitional government in 1991, government adopted a gradual approach in the financial sector. The sector’s reform began with the streamlining of monetary and exchange rate policies. Between 1992 and 1995, the NBE took a series of measures reforming the interest rate policy. The Bank transited from a sector-by-sector discriminatory interest rate structure to setting only a minimum deposit rate and a maximum lending rate. In 1995 the cap on the lending rate was lifted, and the Bank began to set only the minimum deposit rate. As noted in Ayalew ( 1993 ), in the foreign exchange market, the birr was initially devalued from 2.07 to 5 birr per US$ in October 1992 to correct the exchange rate misalignment. Then, in a move to allow the market determination of the value of the birr, a wholesale auction system was introduced in May 1993 which served for the next five years until it was finally replaced by an interbank foreign exchange market in 1999. A harmonized system of import tariffs was introduced in 1993 (Ayalew 1993 ).

In a move to strengthen the private sector and invigorate the market system, the financial sector was opened to Ethiopian nationals in 1994 and the remaining restrictions on the current account of the balance of payments, such as ex ante import and export price controls and import quotas, were removed. Nonetheless, in line with its gradualist approach, the government keeps the capital account of the balance of payments closed and has restricted ownership in the financial sector to Ethiopian nationals, except in the case of investment in lease financing.

10.3 Gradual Financial Sector Reform Strategies and Policies

The Ethiopian government’s gradualist approach towards financial sector reform emanated from its beliefs that, first, in developing countries markets are subject to widespread failures because of underdevelopment and sometimes complete absence and, second, finance is only the means and not the end in economic development, so that government should do whatever it takes to make sure that the necessary finance is available for development projects or what are called priority sectors, such as public physical infrastructure, health, and education. The government’s thoughts about financial sector reform are clearly outlined in its industrial development strategy paper (Ethiopian Federal Democratic Republic 2001 ). The government has continued to resist mounting pressure from the International Monetary Fund and the World Bank to open up the financial sector to foreign competition. Even after more than twenty years of financial sector reform experience since 1995, and after a significant transformation in terms of assets, profitability, and prudence, 3 discussion about any form of financial sector liberalization 4 was still taboo in government circles, at least till mid-2018.

Although Ethiopia’s development strategy has unique features in terms of focus and details of implementation, which are designed to fit the country’s level of development and sophistication of the markets, it is clear that the strategy draws heavily on the East Asian developmental state experiences. For instance, the thought behind the gradual, managed, and limited liberalization of the capital account of the balance of payments and the resistance to opening up the financial sector to foreign investors draws on the East Asian countries’ development strategies and experiences, including those of China. First, these countries focused on industrial upgrading along with a pro-investment macroeconomic policy, which did not necessarily mean low inflation and which in many cases involved state interventions that ‘got prices wrong’ (Öniş 1991 ; Chang 2006 ; Rodrik 2004 ; Addison and Ndikumana 2001 ). Second, as Chang ( 2006 : 115) argues, the East Asian countries ‘were more open in the areas like trade, technology and debt, but less open to foreign direct investment, and almost completely closed in relation to the capital market’. They followed a gradual liberalization approach in opening the financial sector and the capital market (Chang 2006 ; Stiglitz 2008 ). In a contribution for the African Development Bank, Lee ( 2017 ) noted: ‘For an effective state activism or industrial policy, state ability for financial control was critical … In the Korean experience, the banking sector had always been expected to “serve” the real sectors by providing a stable supply of the so-called “growth money” at affordable rates, whereas manufacturing or production sectors had always been given priority.’ This was possible because of the establishment of development banks and because of the strong state control of commercial banks.

Moreover, rightly or wrongly, the aftermath of the 1997–8 East Asian crisis has also influenced Ethiopia’s very cautious approach.

10.4 Gradual Opening Up of the Financial Sector

There is also a rich history of theoretical and empirical debate on the role of finance in capitalism and in growth and development. The debates on whether finance leads economic growth or growth leads financial development are at least as old as the seminal papers of the two prominent economists Schumpeter ( 1911 ) and Robinson ( 1952 ). While Schumpeter argues for indiscriminate opening of the sector, Robinson ( 1952 ) argues for guided and gradual opening. Schumpeter ( 1911 ) claims that financial development is strongly associated with real per capita GDP growth, the rate and efficiency of physical capital accumulation. McKinnon and Shaw ( 1973 ) argue that repressing the monetary system by imposing restrictions on interest rates, heavy reserve requirements on bank deposits and compulsory credit allocations ‘fragments the domestic capital market with high adverse consequences for the quality and quantity of real capital accumulation’ (McKinnon 1989 : 206). A robust capital market requires an adequately liquid financial system and a stable monetary system (McKinnon 1989 ). Moreover, economists such as King and Levine ( 1993 ) argue that in a market economy, development of the financial sector determines the efficiency and proper functioning of the incentive system, 5 be it prices, interest rate, credit, or exchange rate. When the financial sector is stable and efficient, 6 economic actors gain confidence in government policies and the market, and investors are willing to take risks today trusting that the system is capable of rewarding their venture tomorrow, while, on the other hand, consumers are willing to postpone current consumption in favour of savings, fully relying on the system that they will be able to maximize consumption tomorrow. It is this coincidence of willingness of investors and consumers that enables an economy to achieve faster and sustainable economic growth, and the macro-economy to maintain a sustainable resource balance.

On the other hand, the Robinson camp argues that financial development follows economic growth. They argue that higher economic growth boosts the demand for financial services. Consequently, financial institutions and financial services expand in all dimensions, i.e. in type, quantity, and quality. Ang and McKibbin ( 2005 : 22) argue that ‘financial liberalization is unlikely to result in higher economic growth without an efficient and well-functioning financial system. To accelerate growth, the financial system must be properly shaped before undertaking any liberalization program.’ De Aghion ( 1999 ) and Öniş ( 1991 ) also contend that, in developing countries, markets are not ready to provide finance to long-term development projects, which calls for these countries’ governments to intervene in the market to ensure that there is adequate finance for industrial growth and that resources are directed to long-term projects by creating the necessary price distortion: the state has to ‘socialize’ the risk and high capital requirements of large-scale projects that may take years to generate returns, many of which are social rather than purely private returns. Therefore, unlike McKinnon and Shaw ( 1973 ), the Robinson camp favours a careful and phased approach towards financial liberalization. 7 According to the latter, the debate must not be whether to open or not to open. Rather, when to open and which necessary conditions must be fulfilled before resorting to full liberalization of the sector.

A further set of arguments have emphasized the inherent instability of financial markets and the tendency for financial innovation to outstrip regulatory efforts and to aggravate cyclical tendencies to instability. Economists working in this vein draw perhaps above all on Minksy ( 1986 ), and many have argued that their ideas were validated by the global financial crisis of 2007/8, whose effects rippled out beyond the United States and other advanced economies to affect many African and other low- and middle-income economies. Recent work—especially in the wake of the financial crisis—clearly reinforces the need for caution with respect to the size and rate of growth of finance and underlines the argument for ‘strong and counter-cyclical regulation of finance’ (Griffith-Jones, Karwowski, and Dafe 2016 ).

Empirical research on this area is also divided along the lines of the above two groups. Although a growing number of empirical researchers, including King and Levine ( 1993 ) and Calderon and Liu ( 2003 ), seem to support Schumpeter’s view, studies such as Atje and Jovanovic ( 1993 ), Demetriades and Hussein ( 1996 ), and Ang and McKibbin ( 2005 ), claim to disprove Schumpeter’s line of argument. Using data on eighty countries over the 1960–89 period, King and Levine ( 1993 : 717) claimed to prove Schumpeter’s view that ‘financial development is strongly (and causally) associated with real per capita GDP growth, the rate of physical accumulation, and improvements in the efficiency with which economies employ physical capital’. On the other hand, Ang and McKibbin ( 2005 ) challenge King and Levine’s finding by arguing that there is a bias in the cross-country analysis caused by the lack of adequate time series data and that this tilts the regression findings in favour of Schumpeter’s camp. Applying co-integration analysis on the Malaysian time series data between 1960 and 2001, Ang and McKibbin ( 2005 ) claim to find that, in the long run, output growth causes financial depth.

The Ethiopian government has tended to agree with the Robinson camp. The debate is not on whether to open the sector or not, rather on how and when to open it. Although markets may be relatively efficient in allocating resources, this is only the case under certain demanding conditions (Ang and McKibbin 2005 ). Perhaps particularly in developing countries, where markets are even more fragmented and less developed than in advanced capitalist economies, market failures are believed to be widespread. Thus, it is feared that letting ‘the market’ make resource allocation decisions completely freely might produce a sub-optimal allocation of very scarce resources.

In addition, as markets tend to direct resources to sectors whose benefits can be appropriated privately in full, critical sectors for long-run growth, i.e. sectors that help to expand the long-run capacity of the economy, such as public infrastructure, education, and health, will fall short of finance. In other words, if the economy does not redirect resources to development sectors, the economy will remain trapped in a vicious circle of poverty. Hence, to break the circle of poverty and turn it into a virtuous circle of growth, government must intervene to create the necessary conditions to increase the rate of domestic investment and savings and deposit mobilization. Plus, government should also make sure that mobilized resources are redirected to development projects by providing the necessary incentives and, when necessary, through direct allocation, for example, through the budget.

10.5 Gradual Liberalization of the Capital Account of the Balance of Payments

The financial sector, particularly the banking system, is one of the most sensitive sectors in developing countries, whose success or failure could have wider ramifications for the economy. Didier, Hevia, and Schmukler ( 2011 ) and Radelet and Sachs ( 1998 ) argue that financial crises can easily end up as full-blown domestic crises if they are not properly managed. 8 Countries that have been able to secure a stable and healthy financial sector, particularly the banking sector, for a relatively long period have enjoyed faster and more sustainable investment and economic growth. The East Asian experience was one of the most widely cited examples in this regard. Until the onset of the 1997–8 crises, East Asian countries enjoyed one of the fastest and most sustained growth episodes in the history of the modern world over more than three decades. Until the beginning of the 1990s, the capital accounts of many of the East Asian Tigers were well protected (Radelet and Sachs 1998 ).

Moreover, many of these countries continued to offer preferential treatment to their strategic sectors such as the export and infrastructure sectors, including using intentional undervaluation of their exchange rates and providing low-cost credit. The foreign exchange market was tightly regulated and effectively protected from domestic and external speculative attacks. This makes it possible for the government to intervene in the credit and foreign exchange market to redirect resources to the productive sectors, using either subsidized interest rate, undervalued exchange rate, or direct credit.

Some studies published after the 1997 crises argue that liberalization of the capital account was the main culprit for the onset of the most debilitating economic crisis in the region’s modern history. Stiglitz ( 2008 ) argues that immediately after the opening up of the capital account, East Asian countries experienced unprecedented inflows of short-term private capital, attracted by high returns and a booming economy. According to the estimates by Radelet and Sachs ( 1998 : 9), ‘total foreign bank lending to the five East Asian countries expanded from $210 billion at end-1995, to $261 billion at the end-1996, an increase of 24 per cent in a single year’. 9 Consequently, on the one hand, banks began to feel over-liquid, put strong downward pressure on domestic interest rates, and pushed real-estate prices artificially high while, on the other hand, central banks were unable to apply counter-cyclical policies due to unprecedented private capital inflow. 10 For instance, the sudden and unprecedented inflow of private portfolios led local currencies to appreciate against the US dollar, prices of goods and services to increase, return to capital of banks to surge, and prices of money to go down.

Then, when investors feel that there is a problem in the fundamentals of the economy, the pressure to withdraw their capital starts to mount to avoid sudden losses as a result of depreciation of the domestic currency or collapse of the economy. Sudden withdrawal of capital by foreign investors causes economies to fall into a liquidity crunch and a rise in interest rates, which, in turn, leaves many firms unable to repay loans. For instance, in 1996, the non-performing loans (NPLs) ratio surged to between 8 per cent in South Korea and 14 per cent in the Philippines. 11 In just a little more than three years of capital account liberalization, it became evident that the new system had significant shortcomings. Returns on investment began to falter, causing investors to worry about the stability of the macro-economy. Consequently, those worried domestic and foreign investors began to short-sell their asset holdings and withdraw, catching the East Asian economies, whose fundamentals had stayed sound for about three decades uninterrupted, off guard. For instance, more than US$100 billion were withdrawn from the ASEAN countries and Korea in the space of the eighteen months after the Thai baht devaluation. Finally, those proud East Asian countries found themselves suddenly forced to go cap in hand to the IMF for major bail-outs (Radelet and Sachs 1998 ). 12 The rationale for the restriction of the capital account in Ethiopia has, therefore, emanated from its interventionist approach to addressing market failure. Accordingly, foreign residents are neither allowed to invest in the financial sector nor to purchase domestic financial securities, such as treasury bills or bonds. Domestic residents, except banks, are also not allowed to buy foreign financial securities or to deposit their assets in foreign banks.

10.6 Financial Sector Performance and Implications for Economic Growth and Stability

10.6.1 financial sector performance.

Ethiopia has achieved significant progress in terms of financial sector growth, adopting a gradualist approach and government intervention in the credit and foreign exchange market. On the other hand, in terms of financial market development, Ethiopia still lags behind many of its African peers such as Kenya, Tanzania, Ghana, and Nigeria. The money market is underdeveloped, and there is neither a debt nor an equity market. It is highly likely that the absence of these markets might negatively affect the economy through lack of market-based price discovery or availability of alternative financing mechanisms. However, from the deposit mobilization and credit allocation perspectives, Ethiopia has achieved impressive results compared to its peers.

Figure 10.1 shows that, in the last seven years, between 2010 and 2017, total banking sector assets as a share of GDP registered significant growth only in Ethiopia and Ghana. Moreover, the increase in the ratio implies that the sector was growing faster than other sectors of the economy. On the other hand, Kenya and Nigeria experienced a marginal decline in total banking sector assets. Figure 10.2 indicates that Ethiopia lags behind Kenya in terms of financial deepening, as measured by broad money-to-GDP ratio.

Total banking sector assets

Broad money, per cent of GDP

Ethiopia’s financial sector growth has been uneven. Based on the government’s policy focus and the sector’s performance, the development process can be divided into three distinct phases since the initial year of the reform in 1992: Phase I (1992–2003), Phase II (2004–10), and Phase III (2011–17).

During the first phase, government policy focused on macroeconomic stabilization and restoring growth after seventeen years of negative annual average per capita growth of 1.9 per cent. Supported by the IMF and World Bank, in this period, the country adopted successive three-year structural adjustment and economic stabilization programmes. The main focus of macroeconomic policies was eliminating monetary overhang, which was believed to be one of the main reasons for the build-up of inflationary pressure (inflation rising to 22 per cent in 1992). Measures were taken to shrink the central bank balance sheet through a government domestic debt repayment programme and by raising the minimum deposit interest rate to 12 per cent. By contrast with the situation in the second and third phases, the average real interest rate for the period reached positive 5 per cent (see Figure 10.2 ). On the other hand, as the financial sector was now open to the private sector, new private banks joined the market. However, as shown in Figure 10.3 , lack of experience in project analysis and absence of information on the quality of customers led to a historically high non-performing loans ratio of 38.3 per cent. Another significant development in this period was that government secured IMF/World Bank-initiated external debt relief, which widened the fiscal space, further lowering the demand for central bank financing.

Selected macro indicators

In Phase II (2004–10), as the consolidation of the monetary and fiscal balance sheets had been completed, government began to reorient the economy towards growth. Monetary and fiscal policies were relaxed. Therefore, as depicted in Figure 10.2 , the base money bar, central bank’s balance sheet expanded significantly. On the other hand, claims on the private sector began to shrink as banks continued to shed non-performing loans from their balance sheet. While the central bank balance sheet saw rapid expansion, with a growth rate of 20.8 per cent, compared to the other two periods this was the only period when commercial banks’ balance sheet expansion fell below the central bank’s balance sheet growth. Consequently, NPL ratios fell significantly (Figures 10.3 and 10.4 ).

Banks’ soundness indicators (annual average)

Phase III (2011–17) was the period when government launched the first and second five-year Growth and Transformation Plans: GTP-I (2011–15) and GTP-II (2016–20). Unlike the first two phases, in Phase III the financial sector was assigned a special role in addressing the huge financing gap identified in the plan. In 2010, a year before the first five-year plan was launched, the domestic savings-to-GDP ratio was less than 10 per cent; but government planned to raise the investment-to-GDP ratio from 24 to 28 per cent, further widening the financing gap to 18 per cent. Hence, the financial sector needed to intensify its deposit mobilization efforts. Additionally, the government planned to undertake huge infrastructure projects and was determined to meet the Millennium Development Goals in health and education. As depicted in Figures 10.3 and 10.4 , this was the period when commercial banks registered a significant growth in deposit and loan expansion while, on the other hand, banks’ soundness indicators improved dramatically.

Moreover, the government has made substantial progresses in terms of bank branch expansion and financial inclusion. As depicted in Figure 10.5 , the number of commercial bank branches increased by more than five fold, between 2010 and 2017, from 681 to 4257. As a result, population per bank branch dropped from 115,712 to 21,940 in the same period. These were made possible through the following ways. First, the NBE advised the Commercial Bank of Ethiopia (CBE), the largest government owned bank, to take the lead in opening more branches outside Addis Ababa and pave the way for private banks to follow. Accordingly, in 2011, CBE managed to open more than 100 branches and the private banks immediately followed. Second, the NBE introduced a financial security called the ‘NBE Bill’, an instrument, which demands each private commercial bank to allocate every 27 per cent of its total loans disbursed a every month for the purchase of the Bill. 13 The outstanding amount of NBE-Bills held by private banks reached 68.9 billion birr in 2017. Practically, this left private banks in need of more liquidity to protect their share of loan disbursement to the rest of the economy and remain as profitable as before. Hence, in search of more deposits, they began to aggressively open new branches including in areas which had never seen any bank branch before.

Bank branch expansion

In terms of development banking, all was not so rosy. With the launching of GTP-I, the role of the Development Bank of Ethiopia in financing development projects intensified. The total assets increased by more than 470 per cent between 2010 and 2017 from 9.2 billion birr to 53.1 billion birr, and its branches numbered 110 in 2017 from just thirty-two in 2010. On the other hand, DBE’s non-performing loans ratio surged to 20.5 per cent in 2017 from 9.1 per cent in 2013. This suggests the government needs to think deeply and strategically about its current development banking model (De Aghion 1999 ; Di John 2016 ).

However, relative to Ethiopia’s regional peers, the domestic capital market is absent, the money market is less developed, and the foreign exchange market is less flexible. The current impressive growth is not sustainable as Ethiopia transitions from investment-led growth to productivity- and efficiency-led expansion. As the economy becomes more complex and the country’s integration into international markets intensifies, the importance of price discoveries and efficient use of resources will increase significantly if the country is to remain competitive in the international market.

10.6.2 Implications for Macroeconomic Stability and Growth

Ethiopia’s financial sector development is found to have a significant positive impact on macroeconomic stability and growth. In terms of efficiency and allocation of resources to economic sectors, banks continue to show strong improvement from one phase to the next, despite the shift in the government’s focus from stabilization to growth. As is clearly evident from Figure 10.6 , interest rate spreads continue to decline. On the other hand, the inflation rate experiences surges in both Phase II and Phase III, partly reflecting the effect of government policy reorientation towards growth and partly thanks to imported inflation resulting from international food price rises in 2006–7 and 2012 (Durevall, Loening, and Birru 2013 ).

Interest rate spread

The financial sector has also made an unprecedented contribution to domestic savings mobilization to finance the surge in investment demand as per the GTP. As depicted in Figure 10.7 , the bank deposit-to-GDP ratio climbed from 25.9 per cent in 2010 to 31.4 per cent in 2017.

Banks’ deposit and gross domestic savings

As shown in Figure 10.8 , the composition of loans has shifted in favour of public sector credit. The government’s increased demand for finance for infrastructure projects is reflected in the sharp rise of public sector outstanding credit since 2010, coinciding with the launch of GTP-I.

Bank credit

As the economy grows more complex while financial sector policy has remained more or less where it was in 2000, the challenges on the macroeconomic front have intensified. The balance-of-payments crisis that intensified after 2015 was a reflection partly of the less flexible foreign exchange market and partly of the collapse in international commodity prices. In terms of the foreign exchange market, the exchange rate remained overvalued for the last six years to 2017 despite the sharp decline in exports and the widening gap between the official and parallel market exchange rates. The wedge between the official and the parallel market exchange rates reached about 30 per cent in May 2018 from less than 5 per cent in May 2014.

10.7 Conclusion

The financial sector has played a key role in Ethiopia’s economic development, particularly since the launching of the first Growth and Transformation Plan. Although Ethiopia’s financial sector growth generally followed output growth in the first two phases, government has started to play a key role in accelerating the sector’s growth through active interventions. Consequently, the number of bank branches expanded from 681 to 4,257 in just seven years between 2010 and 2017 while the deposit-to-GDP ratio rose from 25.9 per cent to 31.4 per cent in the same period.

However, as the economy has been expanding very rapidly and shifting from volume (investment)-based growth to price- and market-led growth, price discovery and efficient allocation of financial resources have become increasingly important. In this context, there may be a case for rethinking policy. Whether a strategy could be developed that allowed for faster change in the finance sector and capital markets without exposing Ethiopia to the full force of liberalization and the very evident risks that accompany this remained, at the pivotal moment of 2018, to be seen. Clearly, there was by 2018 a case for financial sector reform, but the government needed still to heed the multiple warnings about the risks of unbridled financial liberalization.

There is growing evidence that inflexibility in the foreign exchange market has been negatively affecting the long-term growth prospects of the country. The country remains less competitive in international markets and the foreign exchange market imbalance loomed large. Again this signalled a need perhaps to inject some form of flexibility in the foreign exchange market or at least to push for a major export earnings drive of the kind the Korean government adopted in the late 1970s that effectively prevented its debt problem becoming a debt crisis.

Finally, development banking is one of the most important sectors for the government to realize its long-term growth vision. However, the mounting non-performing loans ratio sends a message to the government that the current model is unsustainable. So, there is a need to reconsider a more moderate development banking strategy that involves the participation of more diversified actors, including the private sector, and/or a more effective and selective approach to development banking.

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With the collapse of the commodity prices and the consequent widening of the current account of the balance-of-payments deficit and the rising external debt service ratio, the economy has experienced increased pressure on the foreign exchange market since 2015.

The post office is the only institution that is allowed to render financial services such as money transfer on its own. Other institutions that give similar services serve must attach themselves to banks. In other words, they are allowed only to serve as agents of banks.

The second five-year Growth and Transformation Plan (2016–20), which was launched in 2016, did not mention financial sector liberalization (Ethiopian Federal Democratic Government 2016 ).

The only exception is lease financing, which is now open to foreign investors.

Through monetary policy and credit and exchange-rate markets.

However, Ismail and Smith ( 1994 : 457) argue that sometimes these two conditions seem to be incompatible because ‘stability may come to mean over-cautiousness, whereas efficiency may entail higher risk-taking and lead to financial fragility. It then becomes important for the authorities to tread a careful path between ensuring the integrity of the financial system and enabling entrepreneurial risk.’

However, Ang and McKibbin ( 2005 ) warn policymakers not to indulge in inflationary financing and provision of sub-standard loans in the name of development financing, which are equally detrimental to economic growth in the long run by creating negative externalities in the process.

Many of the major international economic crises that happened in the second half of the twentieth century and the twenty-first century could be, in one way or another, attributable to crises in the financial sector, including the 1929–33 Great Depression, the 1980s debt crisis in Latin America, the 1987 US stock market crash, the 1997–8 East Asian crisis, and the 2007 international financial crisis.

The five East Asian countries are Indonesia, Korea, Malaysia, the Philippines, and Thailand.

For Radelet and Sachs ( 1998 ) the 1997–8 crisis bears witness to the shortcomings of the international capital market and its vulnerability to sudden reversal of confidence.

In Thailand and Indonesia, NPLs reached 13 per cent each in the same period.

The bailout money requested reached US$50 billion.

The Bill has a five-year maturity and the NBE pays 3 per cent interest per annum on it. Then, the NBE automatically transfers the fund to the Development Bank of Ethiopia at 3 per cent interest. The latter uses the fund to finance medium and long-term private-sector investment projects.

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Article Review on Financial Libralization in ethiopia

2024, Dereje Seboka

Financial liberalization is an integral part of the overall economic liberalization. It is a set of operational reforms and policy measures designed to deregulate and transform the financial system and its structure with the view to achieving a liberalized market-oriented system within an appropriate regulatory framework. The full financial liberalization involve six main dimension: the elimination of credit controls, the deregulation of interest rates, free entry into the banking sector, bank autonomy, private ownership of banks, and the liberalization of international capital flows. Most of these dimensions are lacking in Ethiopia because they lack political supports and the politician resists the proposal and advice from international financial institution. The paper attempted to address the details of the political resistance and justification of the politicians for resisting financial sector liberalization. The credibility and soundness of the justification was also assessed. For this purpose data were collected from different secondary data such as journals, article and books. Manuals and reports were also used to substantiate secondary data. It is found that financial sector liberalization in Ethiopia is very low in comparison with some neighboring countries and the sector remains poor and under developed. The majority of populations are out of reach of financial service in the country. Because of the unbalanced concentration of the sectors in the urban areas, majority portion of rural population suffers from acute shortage of financial infrastructure and serves. Based on the above point, it is also found that the justification for not to liberalize is not sound and credible.

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minwagaww walie

RESEARCH GATE

Ethiopia has been introducing social, political and economic reforms to boost human development, inspiring the Financial Times to crown Ethiopia as the fastest growing economy 2010-2020. Nonetheless, today, its economy is in dire straits, a product of the fact that the financial sector remains highly closed and financial intermediation is in a rudimentary state, against advice to liberalise the sector. The famous quote by Arnold C. Harberger, (2010:4) sums it all. “In Ethiopia, as far as economic matters are concerned, in one sense or other, for the elité profits are evil and the search for profits involves, in one form or another, the exploitation of society. The idea that market forces could be trusted to bring about a socially desirable outcome is given almost no credibility at all.” Foreign banks trickled into after China began its economic reforms in 1978 and the UAE only issued its first currency in 1973, when Ethiopia delved into junta rule. Now, Beijing and Dubai are global economic powerhouses. Now, in 2022, as the nation’s leaders announced the setting up of credit and capital markets and opening the financial sector, the article hones on gleaning best practices in to really transform the economy of this ancient nation. Hence, the objective is to eliminate ‘financial repression’ and promote the role of the market and right size the role of the state in determining who gets and gives credit and at what price. The research inquiry augurs on what has decades of state finance yielded and what are the strategic options for economic governance to carve an ideal role of the state? As Ethiopia liberalises its financial sector, it is vital to cement financial laws and regulations of the commercial banking, insurance, derivatives markets, capital markets and investment management sectors. Moreover, it is necessary to set up financial regulation and supervision regimes, which subjects financial institutions to certain requirements, restrictions and guidelines, aims to maintain the stability and integrity of the financial system. To cap this all a merit based governance of the central bank is imperative learning form the U.K. when Mark Carney, a Canadian citizen, was the only non-Briton to have been Governor of the Bank of England since its conception. Keywords: Ethiopia, financial intermediation, financial liberalisation, credit and capital markets

henok zerihun

Policy Research Working Papers

Muluneh Ayalew Gobezie

Research Journal of Finance and Accounting

Abu Abubeker

Financial development is comprehensive term that represent the structure, size, accessibility and efficiency of financial intermediaries. Each of this element of financial development is measurable. This paper deals with the structure of Ethiopian financial system, and size, accessibility, efficiency and concentration of the banking sector in particular. These dimensions of Ethiopian banking sector measured using ratio of private sector credit to GDP, demographic and geographic distribution of banks’ branches, interest rate spread, concentration ratio and Herfindahl-Hirschman index. As the result of the analysis show Ethiopian banking sector was shallow, less inclusive and highly concentrated. Keywords : Ethiopian banking sector, concentration ratio, Herfindahl-Hirschman index.

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Article Details

Main article content, establishing financial markets in ethiopia: the environmental foundation, challenges and opportunities.

This paper intends to examine the environmental foundation for establishing financial markets in Ethiopia, identify the potential challenges and opportunities. The environmental foundation is assessed using the PEST (political, economic, social and technological) perspectives. Emphasis is given to identify the roles that financial markets can play in expediting Ethiopian economy, the environmental factors that need to be analyzed the current situation of Ethiopia in terms of each factor. An exhaustive analysis of literature has been made on the secondary data obtained from different sources. The research method employed in the study has both qualitative and quantitative features. The findings of the study are presumed to be of paramount importance in providing input information for policy makers towards establishing financial markets in Ethiopia. As a way forward the Government of Ethiopia (GoE) need to take timely actions to further investigate the environmental situation to establish financial markets, appreciate the potential opportunities and make preparations towards addressing the direct challenges.

Keywords : Financial Market, Securities Market, Environment, Governance

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New York Stock Exchange tests views on round-the-clock trading

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Jennifer Hughes in New York

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The New York Stock Exchange is polling market participants on the merits of trading stocks around the clock as regulators scrutinise an application for the first 24/7 bourse.

The survey by the NYSE , part of Intercontinental Exchange, was put out by its data analytics team rather than its management, but it highlights the growing interest in trading the likes of Nvidia or Apple overnight between 8pm and 4am Eastern time.

The issue has become a hot topic in recent years, prompted in part by the 24/7 operation of cryptocurrency trading and the rise in retail investor activity first spurred by coronavirus pandemic lockdowns.

Stock exchanges have become something of a laggard in a world where other big markets, including US Treasuries, major currencies and leading stock index futures, can be traded around the clock from Monday to Friday.

Several retail brokers, including Robinhood and Interactive Brokers, now offer 24-hour weekday access to US stocks with trades either matched with their internal holdings, or conducted via a “dark pool” trading venue such as Blue Ocean, where shares are often traded with Asian retail investors in their daytime.

An overnight exchange, however, would be a step-change in how late trading is perceived because of its heavy regulatory oversight compared with dark pools. Exchanges are directly supervised by the Securities and Exchange Commission and tested for their stability and security as well as needing approval to alter any rules.

Trades on exchanges also form part of the consolidated “tape” — the official record — of trading prices, meaning night-time activity would be more likely to set the early tone for regular hours trading.

NYSE’s survey asked respondents whether they thought round-the-clock trading should take place at weekends as well as through a five-day week, how investors should be protected from price swings, and how respondents would staff any overnight session.

It also asked whether people agreed that “time spent thinking about overnight trading would be better spent on regular market hour trading”.

The survey comes as start-up 24 Exchange, backed by Steve Cohen’s Point72 Ventures fund, is seeking SEC approval to launch the first round-the-clock exchange. The filing is the second attempt for 24X, which withdrew a proposal last year over operational and technical issues.

As of Friday, there were no letters raising issues with 24X’s latest proposal. The SEC has several months to scrutinise the plans.

“I have no idea how much volume they’re going to be doing in the middle of the night. But it’s really not up to the SEC to decide whether it’s commercially viable or not,” said James Angel, a finance professor at Georgetown University, who filed a letter supporting 24X’s plan.

“I’m in favour of letting the market decide. If it succeeds, we’re all better off and if it doesn’t, well, the exchange’s investors lost.”

The committee that oversees the consolidated tape has begun meeting, according to two sources, to examine the issues involved in shifting to 24-hour trading — including who should bear the costs. Clearing houses, which help settle trades, also operate within set hours.

Institutional interest in overnight trading has been muted because of the relatively poor liquidity on offer and concerns around settlement risk, among other issues.

Current night owl offerings only allow retail traders to put in “limit” orders where they state the price at which they would buy or sell. If that is not met, the order expires, unfilled, the next morning.

“There’s demand for 24-hour trading, but it's not necessarily from the entire marketplace,” said one institutional broker, who warned that basic staffing could prove another thorny issue.

“Things already happen outside regular hours and you need to keep on top of that to some degree — but that’s very different to something happening to, say, Apple at 2am or even 4pm on a Saturday. What do you do then?”

This article has been amended to clarify that Steve Cohen’s Point72 Ventures fund has invested in 24 Exchange

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What the New Overtime Rule Means for Workers

Collage shows four professionals in business casual clothing.

One of the basic principles of the American workplace is that a hard day’s work deserves a fair day’s pay. Simply put, every worker’s time has value. A cornerstone of that promise is the Fair Labor Standards Act ’s (FLSA) requirement that when most workers work more than 40 hours in a week, they get paid more. The Department of Labor ’s new overtime regulation is restoring and extending this promise for millions more lower-paid salaried workers in the U.S.

Overtime protections have been a critical part of the FLSA since 1938 and were established to protect workers from exploitation and to benefit workers, their families and our communities. Strong overtime protections help build America’s middle class and ensure that workers are not overworked and underpaid.

Some workers are specifically exempt from the FLSA’s minimum wage and overtime protections, including bona fide executive, administrative or professional employees. This exemption, typically referred to as the “EAP” exemption, applies when:

1. An employee is paid a salary,

2. The salary is not less than a minimum salary threshold amount, and

3. The employee primarily performs executive, administrative or professional duties.

While the department increased the minimum salary required for the EAP exemption from overtime pay every 5 to 9 years between 1938 and 1975, long periods between increases to the salary requirement after 1975 have caused an erosion of the real value of the salary threshold, lessening its effectiveness in helping to identify exempt EAP employees.

The department’s new overtime rule was developed based on almost 30 listening sessions across the country and the final rule was issued after reviewing over 33,000 written comments. We heard from a wide variety of members of the public who shared valuable insights to help us develop this Administration’s overtime rule, including from workers who told us: “I would love the opportunity to...be compensated for time worked beyond 40 hours, or alternately be given a raise,” and “I make around $40,000 a year and most week[s] work well over 40 hours (likely in the 45-50 range). This rule change would benefit me greatly and ensure that my time is paid for!” and “Please, I would love to be paid for the extra hours I work!”

The department’s final rule, which will go into effect on July 1, 2024, will increase the standard salary level that helps define and delimit which salaried workers are entitled to overtime pay protections under the FLSA.

Starting July 1, most salaried workers who earn less than $844 per week will become eligible for overtime pay under the final rule. And on Jan. 1, 2025, most salaried workers who make less than $1,128 per week will become eligible for overtime pay. As these changes occur, job duties will continue to determine overtime exemption status for most salaried employees.

Who will become eligible for overtime pay under the final rule? Currently most salaried workers earning less than $684/week. Starting July 1, 2024, most salaried workers earning less than $844/week. Starting Jan. 1, 2025, most salaried workers earning less than $1,128/week. Starting July 1, 2027, the eligibility thresholds will be updated every three years, based on current wage data. DOL.gov/OT

The rule will also increase the total annual compensation requirement for highly compensated employees (who are not entitled to overtime pay under the FLSA if certain requirements are met) from $107,432 per year to $132,964 per year on July 1, 2024, and then set it equal to $151,164 per year on Jan. 1, 2025.

Starting July 1, 2027, these earnings thresholds will be updated every three years so they keep pace with changes in worker salaries, ensuring that employers can adapt more easily because they’ll know when salary updates will happen and how they’ll be calculated.

The final rule will restore and extend the right to overtime pay to many salaried workers, including workers who historically were entitled to overtime pay under the FLSA because of their lower pay or the type of work they performed.

We urge workers and employers to visit our website to learn more about the final rule.

Jessica Looman is the administrator for the U.S. Department of Labor’s Wage and Hour Division. Follow the Wage and Hour Division on Twitter at  @WHD_DOL and LinkedIn . Editor's note: This blog was edited to correct a typo (changing "administrator" to "administrative.")

Wage and Hour Division (WHD)
Fair Labor Standards Act
overtime rule

Overall bank rating

Pros and cons.

Money market account

How PNC Bank works

Is PNC Bank trustworthy?
PNC Bank vs. Capital One 360
PNC Bank vs. Wells Fargo

Frequently asked questions (FAQ)

Pnc bank review 2024.

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PNC High Yield Savings® Account

no monthly service fee

Check mark icon A check mark. It indicates a confirmation of your intended interaction. Competitive APY
Check mark icon A check mark. It indicates a confirmation of your intended interaction. No minimum opening deposit or account balance
Check mark icon A check mark. It indicates a confirmation of your intended interaction. No monthly service fees
Check mark icon A check mark. It indicates a confirmation of your intended interaction. Mobile check deposit
con icon Two crossed lines that form an 'X'. Only available in select locations but it can only be opened online
con icon Two crossed lines that form an 'X'. Limited customer service hours

PNC Bank pays a great savings rate on its high-yield savings account, but a low rate on its regular savings account. You can only open a PNC High Yield Savings® Account if you live in certain parts of the US.

Offer is only available online in the following states: AK, AR, AZ, CA, CO, CT, HI, ID, IA, KS, LA, ME, MS, MT, NE, NM, NV, NH, ND, OK, OR, RI, SD, TX, UT, VT, WA, WV, WY
Offer is available online and in a PNC Solution Centers in MA, MN, TN and in the greater Kansas City area in MOMinimum account balance of $1 to earn APY
No monthly maintenance fee
No minimum opening deposit

The PNC High Yield Savings Account is probably the bank's best product. It pays solid interest rate if you keep at least $1 in your account and doesn't charge monthly maintenance fees.

This account is only available online, but not everyone is eligible to open an account. You may not eligible to open a PNC High Yield Savings Account if you live in one of the following states:

North Carolina
Pennsylvania
South Carolina
Washington, DC

PNC does offer other savings accounts for in-person bankers, but rates are significantly lower, and there are monthly maintenance fees.

Read Personal Finance Insider's guides to the best savings accounts and the best high-yield savings accounts »

PNC Bank Virtual Wallet®

Earn up to $400: Earn $100 if you open Virtual Wallet® and establish total qualifying direct deposits of at least $500 in the first 60 days, $200 when you open Virtual Wallet® with Performance Spend and establish total qualifying direct deposits of at least $2,000 in first 60 days, or $400 when you open Virtual Wallet® with Performance Select and establish total qualifying direct deposits of at least $5,000 in direct deposits in the first 60 days (offer ends 07/01/2024)

$7, $15, or $25 monthly service fee

up to 4.00%

$100, $200, or $400

Check mark icon A check mark. It indicates a confirmation of your intended interaction. No minimum opening deposit to open
Check mark icon A check mark. It indicates a confirmation of your intended interaction. Possible to waive monthly service fees
Check mark icon A check mark. It indicates a confirmation of your intended interaction. Budgeting tools
Check mark icon A check mark. It indicates a confirmation of your intended interaction. Access to Spend (checking account), Reserve (interest checking account), and Growth (savings account)
Check mark icon A check mark. It indicates a confirmation of your intended interaction. Performance Spend reimburses up to $5/month in out-of-network ATM fees charged by providers
Check mark icon A check mark. It indicates a confirmation of your intended interaction. Performance Select reimburses up to $10 per statement period for other financial institutions' ATM surcharge fees and there are no charges for PNC and non-PNC Bank ATMs
Check mark icon A check mark. It indicates a confirmation of your intended interaction. Reserve and Growth funds can act as overdraft protection for the Spend account
Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low Cash Mode® helps prevent overdraft fees on Spend account
con icon Two crossed lines that form an 'X'. $3 out-of-network ATM fee for the basic Virtual Wallet product
con icon Two crossed lines that form an 'X'. $7, $15, or $25 monthly service fee if they do not meet the qualifications to waive

PNC Bank's strongest products are its digital accounts, but your options will depend on where you live.

1 Virtual Wallet® is actually 3 accounts: Spend (checking), Reserve (interest checking), and Growth (savings)
Low Cash Mode gives you at least 24 hours to bring your available account balance to $0 before you're charged overdraft fees on your Spend account
You can just have Spend, or choose to add Reserve and Growth at no extra cost
To waive the monthly service fee you must meet certain requirements
Earn $100 if you open a Virtual Wallet® and receive $500 in qualifying direct deposits in first 60 days, $200 if you open a Virtual Wallet® with Performance Spend and receive $2,000 in direct deposits in first 60 days; $400 if you open a Virtual Wallet® with Performance Select and receive $5,000 in direct deposits in the first 60 days
Branches in 29 states and Washington, DC
Access to about 60,000 PNC and Partner ATMs
FDIC insured

PNC has an online checking account called PNC Bank Virtual Wallet® . Even though it's a digital product, you can open a PNC Bank Virtual Wallet® if you live in a market with branches.

PNC calls its everyday checking features Spend. At no extra cost, you can also open a PNC Bank Virtual Wallet® package with two additional buckets: Reserve (interest checking) and Growth (long-term savings). Right now, you'll earn a high interest rate on your Growth balance. You can also earn a slightly higher interest rate on your Growth balance if you qualify for a relationship rate.

PNC Fixed Rate CD

0.01% to 5.25% (vary by location)

Check mark icon A check mark. It indicates a confirmation of your intended interaction. Terms up to 10 years
Check mark icon A check mark. It indicates a confirmation of your intended interaction. Low-to-standard early withdrawal penalties
con icon Two crossed lines that form an 'X'. Low APY
con icon Two crossed lines that form an 'X'. $1,000 opening deposit
con icon Two crossed lines that form an 'X'. Only available for residents of certain states

PNC Bank CD rates are pretty low overall, unless you choose a promotional term that pays the highest rate — and the best promotional term depends on where you live. If your priority is earning a high CD rate, you're better off opening a CD at one of the best online banks.

Terms ranging from 7 days to 10 years; promotional terms ranging from 4 to 61 months
Only CDs with terms between 3 and 36 months can be opened online
Branches in 29 US states and Washington, DC
For terms under 3 months, early withdrawal penalty is all the interest earned; from 3 months to less than 1 year, early withdrawal penalty is 3 months interest; for terms greater than 1 year, early withdrawal penalty is 6 months interest

PNC offers more types of CDs than most banks, including regular term CDs, which doesn't charge a penalty if you withdraw funds before the CD matures.

However, CDs are only available to residents of states where there are branches, so if you don't live an eligible state, you're out of luck.

PNC Premiere Money Market Account

$12 monthly service fee

0.02% to 3.50% (varies by location)

Check mark icon A check mark. It indicates a confirmation of your intended interaction. Comes with a banking card/ATM card
Check mark icon A check mark. It indicates a confirmation of your intended interaction. Earn a higher rate with higher balances if you have a Performance Select Checking account
con icon Two crossed lines that form an 'X'. No paper checks
con icon Two crossed lines that form an 'X'. $12 monthly service charge
Minimum balance of $1 to earn APY
Avoid the $12 monthly service charge when you maintain a $5,000 average monthly balance or linked to select PNC checking account
Earn Relationship Rates with Performance Checking

The PNC Premiere Money Market Account might be a decent choice depending on where you live. In certain markets, you can earn up to 3.50% APY on account balances of $1 million or more depending where you live.

You'll want to be mindful of monthly service fees on the account, though. You may have to maintain a $5,000 balance or have a select PNC checking account to avoid the $12 monthly service charge.

PNC Bank has around 2,400 branches across 29 US states and Washington DC. Here are the states with brick-and-mortar locations:

Massachusetts
West Virginia

Your decision to bank with PNC could largely depend on whether you live near a branch. For example, you can only access high-yield savings options if you live in an eligible market. If you don't live in an eligible market for the high-yield savings, you can open a Virtual Wallet bundle (includes growth savings account), the Premiere Money Market or the Standard Savings account.

PNC received 4.8 out of 5 stars in the Apple store and 4.4 out of 5 stars in the Google Play store.

PNC has a feature for its Spend account to help avoid overdraft fees called Low Cash Mode . The perk, available through the bank's mobile app, gives you at least 24 hours to bring your account balance to $0 before you're charged overdraft penalties. You also have the option to pay or return individual checks and payments made using your checking account when your balance is negative.

To contact customer support, call Monday through Friday between 8 a.m. to 9 p.m. ET, or on weekends from 8 a.m. to 5 p.m. ET. The bank also has a live chat function , but you'll have to check back later if all representatives are busy; there's no way to queue.

Your PNC accounts are FDIC insured for up to $250,000 , or $500,000 for joint accounts.

PNC Bank trustworthiness and BBB rating

The Better Business Bureau gives PNC Bank an A+ rating . A good BBB rating signifies a company responds effectively to customer complaints, has honest advertising practices, and is transparent in how it handles business.

Despite PNC's great BBB score, the bank has had one recent public scandal. In 2019, PNC was accused of aiding a man in carrying out a fake debt relief project, which cost customers a total of $85 million. In 2014, PNC had suspected the man of running a scheme and closed his bank accounts. But nine months later, the bank let him open more accounts.

PNC Bank vs. Capital One 360

We've compared PNC with Capital One , another bank with physical and digital banking capabilities.

You may like PNC Bank if you're able to get the accounts you want in the state that you live in. For instance, if you live in a state that offers the bank's high-yield savings account it may be a worthwhile option for you to explore.

Otherwise, the Capital One 360 Performance Savings may be a better option if you don't live in state that offers the PNC High Yield Savings® Account . Capital One 360 Performance Savings pays 4.25% (as of 4/11/24) APY and doesn't charge monthly maintenance fees.

If you want to get money market account, PNC Bank will have to be your default option. Capital One 360 doesn't offer one.

PNC Bank vs. Wells Fargo

We've also compared PNC to Well Fargo because both banks have branches in many of the the same parts of the US

You also may prefer PNC if you want to get money market account. The PNC Premiere Money Market Account may not be its strongest product, but Wells Fargo doesn't have a money market account at all.

Wells Fargo is a brick-and-mortar bank. Although it has online banking capabilities, there aren't any online-specific accounts. Wells Fargo has branches in more states than PNC, so if you prefer in-person banking and live near a Wells Fargo branch, you may prefer it to PNC.

You don't need to make an initial deposit if you open the PNC High Yield Savings® Account . The PNC Bank Virtual Wallet® also requires $25 to open at a branch or $0 online.

You might have to pay a monthly service fee on the bank's standard savings and checking accounts in some states if you don't meet certain minimum balance requirements.

If you don't live near a branch, you may be eligible for the PNC High Yield Savings® Account , which doesn't charge any monthly service fees.

The PNC High Yield Savings® Account pays 4.65% APY. You may qualify for this savings account if you live in the following states: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Hawaii, Idaho, Iowa, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Mexico, North Dakota, Oklahoma, Oregon, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, and Wyoming.

Meanwhile, the PNC Bank Standard Savings Account offers a standard rate of 0.01% APY. If you have a checking account and meet the requirements for a relationship rate, you'll earn 0.02% APY on account balances under $2,500 and 0.03% APY on account balances over $2,500.

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IMAGES

(PDF) Linkages between Financial Market Development and Economic Growth
(PDF) The Structure and Performance of Ethiopia’s Financial Sector in
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Ethiopia's National Digital Payments Strategy
PPT By Getahun Nana National Bank of Ethiopia July 2008 PowerPoint

VIDEO

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COMMENTS

Full article: Determinants of financial development in Ethiopia: ARDL
The average value of lending interest rate in Ethiopia from the period 1980 to 2019 is 10.964%. The minimum and the maximum value of this variable is 6.8% and 15.5% respectively with lower variations of 2.556%. The mean value of the inflation rate in the country is 9.798% for the period 1980 to 2019.
Development of Financial Sector in Ethiopia: Literature Review
Generally, public banks dominate the financial industry in Ethiopia. The Commercial Bank of Ethiopia (CBE), the largest bank in the industry, accounts 38.8% of the branch networks, over 53.3% of the outstanding loans and mobilizes about 66.4% of the deposits of the commercial banks (NBE, 2014). However, the progress observed by the private ...
Financial Sector Development and Economic Growth in Ethiopia
Ethiopia by reviewing nat ional bank of Ethiopian annual reports of the year 2008-2018 and articles on development of financial sector in Ethiopia for open discussion.
PDF Ethiopia Ethiopia Financial Sector Development
of a financial sector modernization roadmap to meet the overall government reform plans. The report provides an insight on operations and challenges in Ethiopia's financial sector and proposes a framework to help open and transform the current system to meet the country's future market-oriented growth plan.
[PDF] Financial market development, policy and regulation: the
Financial market development, policy and regulation: the international experience and Ethiopia's need for further reform @inproceedings{Yimer2011FinancialMD, title={Financial market development, policy and regulation: the international experience and Ethiopia's need for further reform}, author={Abay Yimer}, year={2011}, url={https://api ...
Ethiopia
Ethiopia's financial sector has, over the past decade, been operating under a financial repression framework used by the government for managing its monetary and foreign . Ethiopia - Financial Sector Development : The Path to an Efficient Stable and Inclusive Financial Sector
The prospect and challenge of establishing stock market in Ethiopia
A well-functioning stock market plays an important role not only in the development of the financial sector but also contributes to the economic advancement of any nation. In light of this, the study explores three major determinant factors such as institutional, macroeconomic, and policy aspects required to establish the stock market in Ethiopia.
10 Ethiopian Financial Sector Development
In a move to strengthen the private sector and invigorate the market system, the financial sector was opened to Ethiopian nationals in 1994 and the remaining restrictions on the current account of the balance of payments, such as ex ante import and export price controls and import quotas, were removed.
(PDF) The Current State of Ethiopian Financial Sector and Its
The Current State of Ethiopian Financial Sector and Its Regulation: What is New after a Decade and Half Strategy of Gradualism in Reform, 2001-2017 February 2017 DOI: 10.13140/RG.2.2.13411.35369
Development of Financial Sector in Ethiopia: Literature Review
Published 2016. Economics. Journal of economics and sustainable development. This article presents comprehensive review of annual reports and articles on development of financial sector in Ethiopia and for open discussion. Keywords : development, financial sector, Ethiopia. No Paper Link Available.
JRFM
The study examines the determinant factors that influence financial inclusion among small and medium enterprises (SMEs) in Ethiopia. The study uses an explanatory research design and a mixed research approach with both primary and secondary sources of data. More specifically, the study adopts a multiple linear regression model. The finding of the study reveals that; supply-side factors, demand ...
Article Review on Financial Libralization in ethiopia
2024, Dereje Seboka. Financial liberalization is an integral part of the overall economic liberalization. It is a set of operational reforms and policy measures designed to deregulate and transform the financial system and its structure with the view to achieving a liberalized market-oriented system within an appropriate regulatory framework.
African Development Review
This paper is an analytical review of the prospects and challenges of developing securities markets in Ethiopia. With the fall of communism and the emergence of capitalism, many countries around the world are moving toward market-oriented economies and securities markets are springing up on all continents around the globe.
PDF The Structure of Financial System in Ethiopia
Keywords: Ethiopia, Financial System, Financial Markets, Structure, Exchange Market, Formal Financial System 1. Introduction Over the last two decades, though the Ethiopian economy is among the fastest growing economies in the world and the financial system has gone through different stages of development, it is still underdeveloped.
PDF Establishing financial markets in Ethiopia: the environmental
Tiruneh Legesse1 Abstract. This paper intends to examine the environmental foundation for establishing. financial markets in Ethiopia, identify the potential challenges and opportunities. The environmental foundation is assessed using the PEST (political, economic, social and technological) perspectives. Emphasis is given to identify the roles ...
From Dialogue to Action in Ethiopia: A Review of the DFS Providers
Driven by the Digital Ethiopia 2025 Strategy, the journey towards financial inclusion is gaining momentum in Ethiopia. A review of the World Bank's Global Findex 2022 data about financial inclusion in Ethiopia reveals that despite progress, challenges such as gender disparities and limited access to formal financial services persist.
Establishing financial markets in Ethiopia: the environmental
This paper intends to examine the environmental foundation for establishing financial markets in Ethiopia, identify the potential challenges and opportunities. The environmental foundation is assessed using the PEST (political, economic, social and technological) perspectives. Emphasis is given to identify the roles that financial markets can play in expediting Ethiopian economy, the ...
PDF The Role of Financial Sector in The Economic Development of Ethiopia
financial liberalization is the most efficient way for the financial sector and overall economic growth. Thus, the study seeks to make comparative study of the performance of the financial sector before and after the economic reform of Ethiopia. Thus, the paper is divided into five chapters. The first chapter concerned with introductory part.
New York Stock Exchange tests views on round-the-clock trading
The New York Stock Exchange is polling market participants on the merits of trading stocks around the clock as regulators scrutinise an application for the first 24/7 bourse.
Strong US Dollar Looks Set to Stay, Forcing Investors, Economies to
The world's financial markets are encountering a force they didn't bet on for 2024: A strong dollar is back and looks set to stay.. Having entered the year predicting the greenback would ...
What the New Overtime Rule Means for Workers
The Department of Labor's new overtime regulation is restoring and extending this promise for millions more lower-paid salaried workers in the U.S.
American and Southwest airlines both say they lost money in Q1
DALLAS (AP) — Southwest Airlines will limit hiring and stop flying to four airports as it copes with weak financial results and delays in getting new planes from Boeing. Both Southwest and American Airlines reported first-quarter losses Thursday. Demand for travel remains strong, including among business flyers, but airlines are dealing with ...
McDonald's plans to step up deals, marketing to combat slower fast food
In the U.S., same-store sales rose 2.5% in the first quarter, but that was largely due to price hikes carried over from last year. Kempczinski checked his McDonald's app during the call and noted that there were multiple deals available in his area, including one Big Mac for 29 cents when you buy another.
Full article: The determinants of public investment in Ethiopia: An
3. Trends in public expenditure in Ethiopia. Ethiopia has good success story in achieving a consolidated strong record of fiscal and public management (MoFED, Citation 2013) while the fiscal deficit declined from 8.0 per cent of GDP in 2004/05 to 2 per cent in 2012/13, while net domestic borrowing fell from 2.5 to 0.2 per cent of GDP during the same period.
PNC Bank Review 2024
Earn up to $400: Earn $100 if you open Virtual Wallet® and establish total qualifying direct deposits of at least $500 in the first 60 days, $200 when you open Virtual Wallet® with Performance ...
Financial distress situation of financial sectors in Ethiopia: A review
2.1. Concepts and definitions applied in financial distress analysis. Various scholars have been defined financial distress in different ways. According to Hendel (Citation 1996), financial distress is defined as the likelihood of bankruptcy, which depends on the level of liquid assets as well as on credit availability.Denis and Denis (Citation 1995) explained financial distress when a company ...
Full article: Capital structure and profitability: Panel data evidence
The paper primarily studied the empirical relationship between capital structure, as measured by total and short-term debt ratios, and profitability of private banks in Ethiopia, for the period 2013/14 to 2018/19, using panel fixed effects. A survey of 16 private banks are included in the study.