Private sector participation and performance in the Ethiopian economy is weak. This is due to insufficient accessof financial resources to the private sector. The credit market in the country has been overwhelmingly dominatedby state-owned banks whose lending efforts have been dedicated to expanding public infrastructure projects andstate owned enterprises as a matter of policy. The current government reform initiative by the name?Home-grown Economic Reform‘ is expected to bring some adjustments in the financial system so that theprivate sector can have better choice for its long term investment needs with the introduction of market-basedfinancial access. This study employed desk review of secondary data with content analysis of appropriateconceptual and empirical literature. Analysis of establishing stock market as a major alternative to bank basedsystem is conducted using two models: business growth life cycle model and the financial structure model. Themodels are thought to explain the potential contribution of the development of equity market as a complement tothe credit market in the financial structure of the country given the early stage of growth of the economy. Thefindings shown that establishing and developing stock market is strongly recommended to complement bankservices and as an alternative financial access system both to investors and entrepreneurs. Issues to be consideredin the process of establishing a stock market are provided as a way forward. .
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