The Ethiopian Capital Market Authority (ECMA) has officially registered the Collective Investment Schemes Operation Directive No. 1150/2026, following its approval by the Ministry of Justice on September 23, 2026. This legal framework provides the regulatory foundation for establishing and managing investment schemes within the country.
What are Collective Investment Schemes?
At its core, a collective investment scheme is a way for individual investors to pool their money together to invest in a diversified portfolio of assets, such as stocks or bonds. Managed by professionals, these schemes often known as mutual funds in the United States allow everyday savers to access professional investment strategies that would otherwise be difficult to manage individually. By spreading investments across many assets, the risk is distributed, making it a common tool for long-term wealth building.
Issued under the Capital Market Proclamation No. 1248/2021, the new directive outlines the administrative requirements for scheme operators and custodians. It mandates that all collective investment schemes must be registered with the Authority before being offered to the public.
The directive recognizes six specific categories of investment vehicles:
- Money Market Funds
- Mutual Funds
- Real Estate Investment Funds
- Exchange Traded Funds (ETFs)
- Alternative Investment Funds
- Special Designation Funds
To ensure investor protection, the regulation requires that scheme assets remain under the control of an independent custodian, separate from the scheme operator. Both operators and custodians are subject to licensing requirements previously established under the Capital Market Service Providers Licensing and Supervision Directive No. 980/2024.
Hana Tehelku, Director General of the ECMA, stated that the directive aims to channel domestic savings into productive investments through professional management. The Authority will oversee these schemes and their service providers to maintain market integrity.
Why it matters for Ethiopia
The formalization of these schemes represents a shift in Ethiopia's financial landscape, moving beyond traditional bank savings and equity holdings. By providing a legal structure for mutual funds and ETFs, the market creates new avenues for retail and institutional investors to diversify their portfolios. For the growing Ethiopian Securities Exchange (ESX), the introduction of collective investment vehicles is expected to increase liquidity and broaden participation in the capital market.
Stakeholders and interested parties can access the full text of the directive through the official ECMA website.
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