Biblio

The Ethiopian financial sector is characterized by low level of development and relatively closed in nature than
its east African neighbors. When we see the main financial development indicators in Ethiopia: branch to
population ratio is 62,0632; percentage of adult population which has access to formal credit is 1.197% 3and
ranked 1044 in the world in getting credit. Consequently the country’s financial system is distinguished by its
negative real interest rate (-22.5 for saving rate and -21.80 for lending rate)5, 85.4% 6of total loans required
collateral and the required collateral as percentage of loan is 234%7 which is the highest in the sub Saharan
Africa. Regarding financial regulation there are two opposing theories; the financial repression school where
taken financial regulation in the form interest rate control as important policy tool for developing countries and
the liberalization school where considered privatization of the government owned financial institutions and
financial liberalization as important policy tool for the sake of efficiency, soundness and to increase competition
in the financial sector. In this regard even though the government Ethiopia acknowledges the importance of
financial liberalization for the country financial development it follows gradualism approach to liberalization.
For those reasons government intervention rate in the Ethiopian financial system is one of the highest
(425.03%)8. In line with this the paper tries to analyze the trends of financial development, the mode of
liberalization and type of regulation and supervision in Ethiopia financial sector.