Investment in Equities of Allied Activities Directive No. MFI/24/2013

የኢትዮጵያ ብሔራዊ ባንክ NATIONAL BANK OF ETHIOPIA ADDIS ABABA

LICENSING AND SUPERVISION OF THE BUSINESS OF MICROFINANCE INSTITUTIONS Investment in Equities of Allied Activities Directives No. MFI/24/2013

Whereas, investment related activities of microfinance institutions require sound and prudent practices to effectively manage risks;

Now, therefore, in line with the powers vested in it by article 27(2) of Micro-financing Business Proclamation No. 626/2009, the National Bank of Ethiopia has issued these directives.

1. Short Title

These directives may be cited as “Investment in Equities of Allied Activities Directive No. MFI/24/2013”.

2. Definitions

For the purpose of these Directives: 2.1 “agriculture” means business that includes cultivating soil, producing crops, raising livestock, bee-keeping, fishery and other related activities; 2.2 “capital goods finance business” refers to a leasing business in which the lessor provides a lessee with the use of a specified capital goods, against payment of mutually agreed installments over a specified period, on the basis of financial lease or hire purchase lease agreement; 2.3 “financial infrastructure” refers technological platforms and services that include recording, clearing and settlement of payments, securities, and other financial transactions; 2.4 “interest free banking business” refers to a banking business offered through interest free banking window, which is a unit within a conventional microfinance institution exclusively offering interest free banking services; 2.5 “microfinance institution” refers to a company licensed by the National Bank to undertake micro financing business; 2.6 “National Bank” refers to the National Bank of Ethiopia; 2.7 “restricted investment account” means an account in which restrictions are placed by the account holder on where, how and for what purpose the funds placed in the account can be invested.

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3. Investment in Allied Activities

3.1 Microfinance institutions are not allowed to invest in allied activities or business areas other than the following: a) banks, insurance companies, and other financial institutions as may be defined by the National Bank; b) warehousing and other pre/post harvest facilities; c) agricultural inputs and farm equipment distribution; d) trucking and transportation of agricultural products; and e) other activities as may be determined by the National Bank. 3.2 The equity investment of a microfinance institution in any single enterprise engaged in allied activities listed under sub article 1 of this article shall not exceed three percent (3%) of the total capital of the microfinance institution. 3.3 A microfinance institution’s equity participation in all allied activities listed under sub article 1 of this article shall not exceed ten percent (10%) of the total capital of the institution.

4. Exemptions

The prudential limits set under article 3 of these directives shall not apply to equity investments made in: 4.1 businesses related to financial infrastructure; 4.2 companies engaged in capital goods finance business; and 4.3 interest free baking business funded by restricted investment account.

5. Reporting Requirement

Every microfinance institution shall report, on quarterly basis, to the National Bank its investment activities as per the format attached to these directives.

6. Repeal

Investment in Equities of Allied Activities Directive No. MFI/06/96 is hereby repealed and replaced by these Directives.

7. Effective Date

These Directives shall enter into force as of the 1st day of October 2013.

TEKLEWOLD ATNAFU GOVERNOR

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NATIONAL BANK OF ETHIOPIA Investment Activities Reporting Format (Quarterly)

Name of the Institution: _________________________________ Investment Activities Reporting Format (Quarterly): ____________ Period Ending: ________________________________________

No.	List/Description of Investment per Entity	Amount of Equity Investment	% of Total Capital
1.	Investment in Allied Activities
1.1	(Name of the enterprise)
1.2
1.3
	Sub Total 1
2	Investments in capital goods lease finance business or interest free banking business
2.1	Equity investments made in capital goods finance companies
	Sub Total 2
	Grand Total (sub Total 1+ subtotal 2

Authorized Signature _________________________________