Proclamation No. 626/2009 (amends Proclamation No. 40/1996)


(amended through 2009)

This law guides the licensing and supervision of microfinance institutions in Ethiopia.

Part One: General

1. Short Title
2. Definitions
3. Purpose and Activity of Micro-Financing Institutions
Microfinancing activities include:
– accepting both savings and deposits
– extending credit to farmers and small businesses
– drawing and accepting drafts payable within Ethiopia
– micro-insurance
– purchasing financial income generators
– acquiring, maintaining, and transferring property applicable to its business
– supporting income-generating projects for micro and small scale operators
– advising and assisting customers in managerial, marketing, technical, and administrative matters
– managing funds for micro and small scale businesses
– providing local money transfer services
– providing financial leasing services

Part Two: Licensing Micro-Financing Business
License procedures and requirements

4. Requirement of Obtaining License
5. Conditions of Licensing
6. Issuance of License
7. Renewal of License
8. Revocation of License

Part Three: Operational and Financial Requirements and Limitations
Corporate structure, Audit requirements and procedures, Compliance, Disclosure, Inspection, Penalties, and Liabilities

9. Commencement of Operation
10. Acquisition of Shares and Maintaining Shares Register
11. Persons Assuming Management Positions of Micro-Financing Institutions
12. Appointment of External Auditors
13. Duties and Reports of External Auditors
14. Financial Requirements
The National Bank may issue directives governing capital requirements and other safety and soundness standards
15. Financial Records and Disclosure of Information
16. Extending of Loans
17. Prohibitions
18. Inspection of Micro-Financing Institution and Corrective Measures
19. Receivership and Liquidation

Part Four: Miscellaneous Provisions
Sources of funding, Profit and tax liability, ‘Know your customer’ provisions, Prohibition of foreign ownership, Personal liability, and Additional applicable regulation.

20. Publication
21. Transformation of a Micro-Financing Institution to a Bank or other Financial Institution
22. Assistance
23. Exemption from Profit Tax
24. Know-Your-Customer Standards
25. Prohibitions
26. Penalties
27. Issuance of Regulations and Directives
28. Applicability of other Laws
29. Repealed and Inapplicable Laws
30. Effective Date