The National Bank of Ethiopia announced on October 31, 2024, that it has approved a new system of financial transactions between banks.

This system will allow banks to lend to one another to better manage their daily cash flows. Banks will have the option to borrow or lend money for either one day or seven days.

The goal of this new system is to enhance the efficiency of cash flow management in the banking sector by helping banks cover short-term deficits or loan out excess funds.

All financial transactions between banks are required to take place on the trading platform of the Ethiopian Securities Exchange (ESX). Commercial banks must first obtain a license from the National Bank of Ethiopia and meet specific criteria to participate in these transactions.

The central bank has set parameters for the platform’s operation, including conducting trades within an interest rate corridor based on the National Bank Rate (NBR). The upper limit is NBR+3% and the lower limit is NBR-3%.

lastly, The National Bank stated that this new system will reinforce the banking sector, promote a smoother flow of money in the economy, and ultimately drive economic growth.