The History Of Banking And Other Financial Institutions In Ethiopia

The History of Banking and other Financial Institutions in Ethiopia The agreement that was reached in 1905 between Emperor Minilik II and Mr.Ma Gillivray, representative of the British owned National Bank of Egypt marked the introduction of modern banking in Ethiopia. Following the agreement, the first bank called Bank of Abysinia was inaugurated in Feb.16, 1906 by the Emperor. The Bank was totally managed by the Egyptian National Bank and the following rights and concessions were agreed upon the establishment of Bank of Abyssinia:•

The capital of the Bank was agreed to be Pound Sterling 500,000 and one-fifth was subscribed and the rest was to be obtained by selling shares in some important cities such as London, Paris and New York.

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The Bank was given full rights to issue bank notes and monitor coins which were to be legal tender and all the profits there from a ruing to the bank and freely exchangeable against gold and silver on cover by the Bank as well as to establish silver coins and abolish the Maria Theresa.

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Land was given to the Bank free of harges and permitted to build offices and warehouses.

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Government and public funds were to be deposited with the bank and all payments to be made by checks.

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The government promised not to allow any bank to be established in the country within the 50-year concession period.

Within the first fifteen years of its operation, Bank of Abysinia opened branches in different areas of the country. In 1906 a branch in Harar (Eastern Ethiopia) was opened at the same time of the inauguration of Bank of Abysinia in Addis Ababa. Another at Dire Dawa was opened two years later and at Gore in 1912 and at Dessie and Djibouti in 1920. Mac Gillivray, the then representative and negotiator of Bank of Egypt, was appointed to be the governor of the new bank and he was suceeded by H Goldie, Miles Backhouse, and CS Collier were in change from 1919 until the Bank’s liquidation in 1931. The society at that time being new for the banking service, Bank of Abysinia had faced difficulty of familiarizing the public with it. It had also need to meet considerable cost of installation and the costly journeys by its

administrative personnel. As a result, despite its monopolistic position, the Bank earned no profit until 1914. Profits were recorded in 1914, 1919, 1920 and from 1924 onwards. Generally, in its short period of existence, Bank of Abyssinia had been carrying out limited business such as keeping government accounts, some export financing and undertaking various tasks for the government. Moreover, the Bank faced enormous pressure for being inefficient and purely profit motivated and reached an agreement to abandon its operation and be liquidated in order to disengage banking from foreign control and to make the institution responsible to Ethiopia’s credit needs. Thus by 1931 Bank of Abyssinia was legally replaced by Bank of Ethiopia shortly after Emperor Haile Selassie came to power. The new Bank, Bank of Ethiopia, was a purely Ethiopian institution and was the first indigenous bank in Africa and established by an official decree on August 29, 1931 with capital of £750,000. Bank of Egypt was willing to abandon its on cessionary rights in return for a payment of Pound Sterling 40,000 and the transfer of ownership took place very smoothly and the offices and personnel of the Bank Of Abyssinia including its manager, Mr. Collier, being retained by the new Bank. Ethiopian government owned 60 percent of the total shares of the Bank and all transactions were subject to scrutiny by its Minister of Finance. Bank of Ethiopia took over the commercial activities of the Bank of Abysinia and was authorized to issue notes and coins. The Bank with branches in Dire Dawa, Gore, Dessie, Debre Tabor, Harar, agency in Gambella and a transit office in Djibouti continued successfully until the Italian invasion in 1935. During the invasion, the Italians established branches of their main Banks namely Banca d’Italia, Banco di Roma, Banco di Napoli and Banca Nazionale del lavoro and started operation in the main towns of Ethiopia. However, they all ceased operation soon after liberation except Banco di Roma and Banco di Napoli which remained in Asmara. In 1941 another foreign bank, Barclays Bank, came to Ethiopia with the British troops and organized banking services in Addis Ababa, until its withdrawal in 1943. Then on 15th April 1943, the State Bank of Ethiopia commenced full operation after 8 months of preparatory activities. It acted as the central Bank of Ethiopia and had a power to issue bank notes and coins as the agent of the Ministry of Finance. In 1945 and 1949 the Bank was granted the sole right of issuing currency and deal in foreign currency. The Bank also functioned as the principal commercial bank in the country and engaged in all commercial banking activities. The State Bank of Ethiopia had established 21 branches including a branch in Khartoum, Sudan and a transit office on Djibouti until it eased to exist by bank proclamation issued on December, 1963. Then the Ethiopian Monetary and Banking law that came into force in 1963 separated the function of commercial and central banking creating National Bank of Ethiopia and commercial Bank of Ethiopia. Moreover it allowed foreign banks to operate in Ethiopia limiting their maximum ownership to be 49 percent while the

remaining balance should be owned by Ethiopians. The National Bank of Ethiopia with more power and duties started its operation in January 1964. Following the incorporation as a share company on December 16, 1963 as per proclamation No.207/1955 of October 1963, Commercial Bank of Ethiopia took over the commercial banking activities of the former State Bank of Ethiopia. It started operation on January 1,1964 with a capital of Eth. Birr 20 million. In the new Commercial Bank of Ethiopia, in contrast with the former State Bank of Ethiopia, all employees were Ethiopians. There were two other banks in operation namely Banco di Roma S. . and Ban o di Napoli S.C. that later reapplied for license according to the new proclamation each having a paidup capital of Eth. Birr 2 million. The first privately owned bank, Addis Ababa Bank share company, was established on Ethiopians initiative and started operation in 1964 with a capital of 2 million in association with National and Grindlay Bank, London which had 40 percent of the total share. In 1968, the original capital of the Bank rose to 5.0 million and until it ceased operation, it had 300 staff at 26 branches. There were other financial institutions operating in the country like the Imperial Savings and Home Ownership public Association (ISHOPA) which specialized in providing loans for the construction of residential houses and to individuals under the guarantee of their savings. There was also the Saving and Mortgage Corporation of Ethiopia whose aims and duties were to accept savings and trust deposits account and provide loans for the construction, repair and improvement of residential houses, commercial and industrial buildings and carry out all activities related to mortgage operations. On the other hand, there was a bank called Agricultural Bank that provides loan for the agricultural and other relevant projects established in 1945. But in 1951 the Investment Bank of Ethiopia replaced it. In 1965, the name of the bank once again hanged to Ethiopian Investment Corporation Share Company and the capital raised to Eth. Birr 20 million, which was fully paid up. However, proclamation No.55 of 1970 established the Agricultural and Industrial Development Bank Share Company by taking over the asset and liability of the former Development Bank and Investment Corporation of Ethiopia. Following the declaration of socialism in 1974 the government extended its control over the whole economy and nationalized all large corporations. Organizational setups were taken in order to create stronger institutions by merging those that perform similar functions. Accordingly, the three private owned banks, Addis Ababa Bank, Banco di Roma and Banco di Napoli Merged in 1976 to form the second largest Bank in Ethiopia called Addis Bank with a capital of Eth. birr 20 million and had a staff of 480 and 34 branches. Before the merger, the foreign participation of these banks was first nationalized in early 1975. Then Addis Bank and Commercial Bank of Ethiopia S.C . were merged by proclamation No.184 of August 2, 1980 to form the sole commercial bank in the country till the establishment of private

commercial banks in 1994. The Commercial Bank of Ethiopia commenced its operation with a capital of Birr 65 million, 128 branches and 3,633 employees. The Savings and Mortgage Corporation S. . and Imperial Saving and Home Ownership Public Association were also merged to form the Housing and Saving Bank with working capital of Birr 6.0 million and all rights, privileges, assets and liabilities were transferred by proclamation No.60, 1975 to the new bank. Proclamation No.99 of 1976 brought into existence the Agricultural and Industrial Bank, which was formed in 1970 as a 100 percent state ownership, was brought under the umbrella of the National Bank of Ethiopia. Then it was reestablished by proclamation No. 158 of 1979 as a public finance agency possessing judicial personality and named Agricultural and Industrial Development Bank (AIDB). It was entrusted with the financing of the economic development of the agricultural, industrial and other sectors of the national economy extending credits of medium and long-term nature as well as short-term agricultural production loans. The financial sector that the socialist oriented government left behind constituted only 3 banks and each enjoying monopoly in its respective market. The following was the structure of the sector at the end of the era. •

The National Bank of Ethiopia (NBE)

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The Commercial Bank of Ethiopia (CBE)

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Agricultural and Industrial Development Bank (AIDB)

Following the change in the economic policy, financial sector reform also took place. Monetary and Banking Proclamation of 1994 established the National Bank of Ethiopia as a judicial entity, separated from the government and outlined its main functions. Monetary and Banking proclamation No.83/1994 and the Licensing and Supervision of Banking Business No.84/1994 laid down the legal basis for investment in the banking sector. Consequently shortly after the proclamation the first private bank, Awash International Bank was established in 1994 by 486 shareholders and by 1998 the authorized capital of the Bank reached Birr 50.0 million. Dashen Bank was established on September 20,1995 as a share company with an authorized and subscribed capital of Birr 50.0 million. Bank of Abysinia, another private bank was founded by 131 shareholders with subscribed and authorized capital of 25.0 million and 50 million, respectively. Wegagen Bank with an authorized capital of Birr 60.0 million started operation in 1997. The fifth private bank, United Bank was established on 10th September 1998 by 335 shareholders and now has four branches. The last bank to be established to date is Nib International Bank that started operation on May 26, 1999 with an authorized capital of Birr 150.0 million. On the other hand, modern forms of insurance service, which were introduced in Ethiopia by Europeans, trace their origin as far back as 1905 when the Bank of Abysinia began to transact fire and marine insurance as an

agent of a foreign insurance company. According to a survey made in 1954, there were 9 insurance companies that were providing insurance service in the country. Except Imperial Insurance company that was established in 1951, the rest of the insurance companies were branches or agents of foreign companies. The number of insurance companies increased significantly and reached 33 in 1960. At that time insurance business like any business undertaking was classified as trade and was administered by the provisions of the commercial code. This was the only legislation in force in respect of insurance except the maritime code of Ethiopia that was issued to govern the operations of maritime business and the related marine insurance. The minimum paid-up capital required to establish an insurance company was as little as 12,500 Ethiopian dollars as stipulated in the commercial code. There was no restriction on foreign insurers. The first remarkable event that the Ethiopian insurance market witnessed was the promulgation of proclamation No. 281/1970. This proclamation was issued to provide for the control & regulation of insurance business in Ethiopia. It is peculiar in that it created an Insurance Council and an Insurance Controller's Office. The controller of insurance licensed 15 domestic insurance companies, 36 agents, 7 brokers, 3 actuaries & 11 assessors in accordance with the provisions of the proclamation immediately in the year after the issuance of the law. The law required an insurer to be a domestic company whose share capital (fully subscribed) to be not less than Ethiopian dollars 400,000 for a general insurance business and Ethiopian dollars 600,000 in the case of long-term insurance business and Ethiopian dollars 1,000,000 to do both long-term & general insurance business. Non-Ethiopian nationals were not barred from participating in insurance business. However, the proclamation defined 'domestic company' as a share company having its head office in Ethiopia and in the case of a company transacting a general insurance business at least 51% and in the case of a company transacting life insurance business, at least 30% of the paid-up capital must be held by Ethiopian nationals or national companies. Four years after the enactment of the proclamation, the military government that came to power in 1974 put an end to all private entrepreneurship. Then all insurance companies operating were nationalized and from January 1, 1975 onwards the government took over the ownership and control of these companies & merged them into a single unit called Ethiopian Insurance Corporation. In the years following nationalization, Ethiopian Insurance Corporation became the sole operator. Following the change in the political environment in 1991, the proclamation for the licensing and supervision of insurance business heralded the beginning of a new era. Immediately after the enactment of the proclamation private insurance companies began to flourish. Presently there are 9 private insurance companies in operation. National Bank of Ethiopia

has authorized 11 insurance broking firms, 510 insurance agents and 7 loss assessors until July 2000.

Notes & Coins in the Early days

Coins may have existed many years before. However according to official records, it was since the reign of King Endybis and Aphilas that Axum was trading with a legal currency issued by its kings for the use of internal and external trade. The coins were of gold, silver, bronze and copper. Upto 1926, there have been about 513 different types of coins that were in circulation and minted by the Axumite kings of different periods. Of these 173 are gold, 18 of silver and 322 of copper as listed by the French Author A. Kanmerer. The coins had the pictures of the rulers surrounded by palm leaves on one side and the rescent on the other side. The British traveler, A. B. Wylde, in Modern Abyssinia, states, "An ear of grain is placed on each side of the head of the king or ruler of the country, and this no doubt represents the eight lined barley of Abyssinia. Some of the coins bear legends in Greek, and the rest in the first Ethiopian written language called Geez. Melvin J. Kohe, in "Ethiopia - Treasure House of Africa" states, " Coins were struck during the reign of 24 sovereigns extending over a period of 750 years. Francis Anfray indicates that the following 24 Axumite Monarchs issued coins. 1. Endybis III Century A.D. 2. Aphia III Century " 3. Ousanas IV Century " 4. Wazeba I " " 5. Ezana IV " " 6. EonBisi IV " " 7. Esabel V " " 8. Wazeba II " "

9. 1 0. 1 1. 1 2. 1 3. 1 4. 1 5. 1 6.

Mahayeger V " " Allaimyris V " " Qusana V " " Ousas V " " Nezana V Century A.D. Kaleb VI Century " Israel VI Century " Loel VI " "

1 7. 1 8. 1 9. 2 0. 2 1. 2 2. 2 3. 2 4.

Ella Gabez VII Century A.D. Enaeb VII " " Armah VII " " Lazila VII " " Zaya Abyo Le Medhen VII " Quzena VIII Century A.D. Gersem VIII " " Hatas VIII " "

No one knows the exact time when minting of coins started in Axum. Some Archeologists endorse the view that Endybis was the first king to introduce gold coins in his name around the third century (.227-235 A.D.). The second

king to strike similar coins also in his name was Aphilas. The coins bearing the image of kings Endybis and Aplilas are among the evidence that pre Christian Ethiopia had her own currency. After Endybis and Applials each succeeding Axumite sovereign introduced his own coins with his image and insignia. •

Barter

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Commodity Money ○

Salt as currency

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Cloth as money

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Iron as Medium of Exchange

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Beads and Wares

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Maria Theresa Thaler

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Other Coins

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Coins in 1890 –1935

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Silver Coins

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Copper Coins issued in 1896

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Nickel Coins

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Copper Coins

Bank Notes

Barter

Barter the direct exchange of goods for goods – was the first stage of monetary development. History reveals that barter was used before coins ame into being. When minting of the Axumite coins discontinued for centuries, Ethiopia was doing her commerce by means of primitive money i.e. with bars of salt, articles of clothing, small iron bars, honey, butter, rifles, cartridges (live or empty), crops and cattle. Articles like animal skins, small decorative ornaments such as beads, cowrie shells, and bracelets were also used as money at different times. But of all these, the famous bar of salt "amole hew", was the most widely accepted and circulated as money in Ethiopia. Two amoles (2 salt bars) were exchanged for about 16 kilos of wheat. If a peasant wanted ploughshares for ploughing or sickles, he had to go to the iron managers and give them crops of equivalent value to get his farm tools. Commodity Money

Salt as currency

In Ethiopia, there was a time when salt was even preferred to gold and silver. The amole salt served as a principal item of exchange in Ethiopia for over one thousand years. Salt was not merely a kitchen commodity but also a medium of exchange in larger scale transactions. The salt bar used as a medium of exchange in Ethiopia was called "guela" in Tigrigna, amole in Amaharic and its common name was " hew" which means salt both in Aamharic and Tigrigna. Cloth as money

Along with salt there was another article of primitive money used as an instrument of commerce and means of exhange. This was imported and locally made length of cotton cloth. It was the second most popular means of exchange after salt. In the nineteenth century, American grey sheetings were shipped from the United States to Ethiopia via Djibouti, Massawa and Aden. The garment was sometimes called American or abudjedid. Abujedid was cut into pieces and was popular as an item of clothing. Ethiopian-made cotton cloth was also used for hundreds of years as a medium of trade and exchange in many parts of the country. The difference was that locally made hand woven cotton loth was more expensive and of better quality while being soft and heavy. The principal cotton cloth used as money was called shema in Amharic or fergi in Tigrigna. Like salt one could buy anything with shema or fergi. Even cattle could be bought with these items. Iron as Medium of Exchange

In the19th century, pieces of iron bars were used as primitive or commodity money in Ethiopia and neighboring countries and were considered the third most accepted item of trade and medium of exchange. The disadvantage of iron as a medium of exchange was that it was heavy to transport and was not produced in large quantities like salt. The advantage was that iron was not easily spoiled or breakable and it could be kept for a long time. Iron was considered as source of accumulated wealth, in particular ploughshares were valued and were counted and considered as a measure of a man’s wealth. Beads and Wares

Other goods used as ccurrency were items utilized for ornamental purposes, mostly worn by women, girls, boys and small children. These were mostly metals out of which bracelets and rosses were made. Beads (rosary) served for exchange and ornamental items. From earliest times beads have been

used and worn by people for saying prayers, as ornaments or for witchcraft. Beads were used also as substitutes for coinage at the time when coins were not known. Beads are small, round objects with a hole in the center and made of glass or wood. The beads were of various sizes and colors. Maria Theresa Thaler

With the centry of foreign nationals to Ethiopia, (18th entury) the country started to increase its activities in international commerce. Although the exact date of the Maria Theresa thaler’s centry into Ethiopia is not known, it is believed that Arab traders introduced it into the country at the end of 18th century. It came into wide circulation about the middle of the 19th century, and it remained the most widely acceptable form of currency until 1945. Neither the coinage of Menelik nor of Haileselassie minted before 1935 could displace it. It was the first foreign coin that entered Ethiopia and the only one that generally accepted by the entire population of Ethiopia. The primary reason was that Ethiopia had no currency of its own at that time. The fact that it was made of silver was an additional cause for its spreading. The value of the coin constantly fluctuated. The theler was brought from Vienna or any other place where it was available and exchanged for silver or other commodities, usually in large quantities. During the Italian invasion of Ethiopia it was believed that there were about 50 million Maria Theresa thalers circulating in the country between 1935 – 41. The Italian bought the master dice f the Maria Theresa thaler from the sole owner and producer of the coin, the Austrian government before the war of 1935 in order to produce as many of the coins as they liked and to have a monopoly over its issue. However, at the time the Italians purchased the dice of the coin, Ethiopia already had her own bank notes and coins through these were of little quantity. Later, during the Italian occupation, several decrees were issued from time to time ordering all people to stop using the thaler and transact all business with the Italian lire alone. But as the Ethiopian people had no confidence in the lire, and due to unpopularity of the Italian regime, they continued to use the Maria Theresa thaler. In 1941, after the defeat of the Italians, the British brought with them East African Shillings. This currency was in use in Ethiopia for a short time, on currently with the Maria Theresa thaler and the usual medium of bartering, salt. Thus multiple currencies and commodities were used along with the Austrian coin. After the war, the Italian lire were still in use for some time in some parts of Ethiopia, but disappeared instantly from the commercial centers. During the 19th century, besides the Maria Theresa thaler other foreign coins such as the Indian rupees were used for some time in Tigrai and Harrar and

were favorably accepted in those markets. Rupees where here used as legal tender in British Somaliland and British occupied Aden. Earlier, there were also the Harrar local currency called "mahalek" and "ashrafi" that existed from 1789 to 1887. They were handmade and were used in and around Harrar city to facilitate local trade in addition to the existing bartering system. These were the first coins issued in Ethiopia since the Axumite coins ceased to operate about one thousand years before. Other Coins

Coins in 1890 –1935

Menelik II as ended the Ethiopian throne in 1889 after the death of Yohannes IV. The same year the Italians occupied part of the Eritrean highland. The Italians produced a coin called Tallero Eritreo of the same size and shape as Maria Theresa thaler to make people believe that it was almost of the same ontent and value as the thaler. It was minted in Rome and appeared in the market of Asmara in 1890. The Italians thought this new thaler or dollar with its denominations would gain popularity and replaces the Austrian coin, which lacked divisional units, not only in occupied Eritrea but also in Ethiopia. As Ethiopia had no currency of its own at that time, the Italians had a strong belief that their currency would influence the Ethiopians as well. The Italians hoped it would be the established currency in Ethiopia with the help of Emperor Menelik. But this hope was soon dispelled as a result of misunderstanding over the interpretation of the ItaloEthiopian agreement of Wuchallie, which intimated that the Italians wanted to put the whole of Ethiopia under their protectorate. In 1889 Menelik signed at Wuchallie a treaty with Italy acknowledging Italian claim to the Asmara district. After finding, however, that according to Italian version of one of its articles the treaty placed his Empire under Italian domination, Menelik denounced it. In order to impress the governments of Europe that Ethiopia would not accept the protectorate, which the Italians claimed to have established, Emperor Menelik decided to strike his own money. The Emperor decided to make his own coin similar to that of the Austrian thaler and provided smaller denominations. He instructed a mint in Paris to make a series of coins, which soon appeared in Addis Ababa. Coins bearing the image of Emperor Menelik, which appeared in 1884, were of the following denominations. Silver Coins 1 thaler or birr

Copper Coins issued in 1896 1/16 of a birr or Mehalek 1/37 of a birr or bessa 1/64 of a birr or ½ bessa

Menelik’s coins were the first national coins minted after the fall of the Axumite Empire. One must remember that the Harrari currency was only a locally used currency. A machine was brought from Paris for minting coins and larger coins of smaller denominations were produced in Addis Ababa starting in 1903. As the people of Ethiopia were accustomed in using the Maria Theresa thaler for many years, Menelik’s birr was not that much popular in the market for quite a while. Although the Maria Theresa thaler was widely popular among the people, Menelik’s coins were superior to Maria Theresa in the sense that they were easily divisible and could be used conveniently in retail trade. Menelik’s dollar weighed 28.075 gms, marginally heavier than the Maria Theresa thaler which weighed 28.0668 gms, although it had the same diameter of 40 mm. In order to gain acceptance by the people for his new currency Menelik, issued a proclamation in 1908, which declared the birr in his own image was to be the sole medium of exchange throughout Ethiopia. Menelik’s coins were replaced by the new metri system coins issued in July 1933 bearing the image of the deposed Emperor Haile Selassie. These were metal currencies based on cents or one-hundredth part of a dollar. Nickel Coins

Birr Half birr Quarter birr One-tenth birr

100 cents 50 cents 25 cents 10 cents

Copper Coins

One-Twentieth birr

5 cents

One-Hundredth birr

1 cent

These were minted partly in London and partly in Addis Ababa. The new coins were used also in a limited way, as the famous Maria Theresa thaler was still the dominant coin along with the famous salt bar.

All the above coins were introduced in order to discourage the people from using the primitive money and to get rid of foreign coins. The coins were circulated slowly by the people, but the coins were unable to abolish the Maria Theresa thaler completely from circulation, as it had been popular and widely used for many years. The reason that the new coins were not able to replace the thaler completely and immediately was that the people discovered that the silver content of the new coin was not equal to that of the Maria Theresa thaler. In other words, the Maria Teresa thaler served a dual purpose, one for commerce and exchange and the other for speculations and various ornamental decorations. A similar thaler when melted down could be worth approximately its own value in silver. Bank Notes

Historically speaking, the use of bank notes is said to have begun, for the first time by gold smiths. As they used to keep people’s thus, for money entrusted to them, whether a small or a big sum, receipts were issued. The receipts a ted as a sort of money, the gold smiths returned the money by taking back the receipts, and the buyers bought this with their cash. But as buyers found it tiresome to go to the goldsmith, returned the money by taking back the receipts, the buyers bought things with their cash. But as buyers found it tiresome to go to the goldsmith each time they considered buying an item, the buyers gave the receipt to merchants and took the items they wanted. Thus, the merchants obtained money by handing the receipts to the goldsmiths. And so the receipts acted like bank note and in this early forms of bank notes were created. In contrast to the metalli or commodity money used in Ethiopia in the past, a new kind of money was now introduced. This was the bank note or paper money, which appeared for the first time in Addis Ababa in-1914 – 1915, issued by the Bank of Abyssinia. It was used as legal tender and was freely exchangeable against gold or silver cover. This paper money, in 5, 10, 100 and 500 birr denominations was printed in London. Again, notes were issued in 1933 by the Bank of Ethiopia, whi h replaced the Bank of Abyssinia. These new dollar notes again were printed in London in a series of bank notes of 5, 10, 50, 100 and 500 values. The paper money was circulating in place of gold or silver as representative money. Moreover, as the government promised to pay the amount stated on the note in gold, it got relative acceptance in the market than the former (previous) notes. This was done in order to encourage the spread of bank notes and to make the public understand that bank notes were as good as gold and silver. Although the notes were issued in larger quantities than the previous ones, they were not circulated in all parts of Ethiopia. However, they were widely circulated in Addis Ababa. Even though the people were advised repeatedly that 100 percent gold

deposits backed the paper currency, still a good size of the population did not have much confidence in it. The reason why the notes were not widely accepted was that the Ethio-Italian war of 1935 was approaching and thus people thought the time was risky and were looking for silver coins that later could be converted into another commodity money. In such circumstances, the Maria Theresa thaler and salt bar regained popularity once again. By proclamation No.76 of 1945 the State Bank of Ethiopia, later National Bank of Ethiopia, had issued bank notes and coins with the image of the Emperor Haileselassie. The issued Ethiopian Birr (dollar) was divided into 100 cents. In order to create the confidence among the people the reserve requirements were being upto 75% and later reduced to 30 percent. The Birr was printed legally binding promise by the National Bank of Ethiopia to pay the bearer on demand specified amount of dollars and for this reason were also accepted for the payment of debts. Payments were made in accordance with the value of each notes and as denoted on the note to the "payable to the bearer on demand". The currency issued in the effigy of ex-Emperor Haileselassie in 1945 were: One Ethiopian dollar note Five Ethiopian dollar note

Eth. $ 1.00 Eth. $5.00

Ten Ethiopian dollar note

Eth. $10.00

Twenty Ethiopian dollar note Hundred Five Hundred

Eth. $20.00 Eth. $100.00 Eth. $500.00

When the Ethiopian paper dollar was issued, it was used for six months side by side with the East African Shillings, which were introduced by the British for the payment of the salaries of their troops. The cents were made of copper metal composed of the following denominations of coins. One Hundredth of a dollar note One twentieth " " " One tenth " " " One quarter " " " One half of " " "

Currency of the Derg Era and the present.

Eth.$ 0.01 Eth.$0.05 Eth.$0.10 Eth.$0.25 Eth.$0.50

On September 21, 1976, the provisional Military Administrative Council (Derg) declared that the old currency was replaced with the new one. In accordance with the legal tender currency notes regulations No.45 of 1976. The Ethiopian dollar issued in 1945 was redeemed and in its place a new paper note alled "Birr" valued at 100 cents was adopted. The Birr notes included: One hundred birr note Fifty birr note Ten birr note Five birr note One birr note

Birr 100.00 Birr 50.00 Birr 10.00 Birr 5.00 Birr 1.00

In accordance with its legal tender currency coins regulations No.57/1977 of the National Bank of Ethiopia issued coins on January 23, 1998 in replacement of the former ones. The coin denominations are: One One One One One

hundredth of a birr note twentieth of a birr note tenth a birr note quarter a birr note half a birr note

Birr Birr Birr Birr Birr

0.01 0.05 0.10 0.25 0.50

After some 20 years the Derg Legal Tender was hanged. The change is not in a full format. But in some minor adjustment. With the exception of that of some background, color interchange among the different denominations, it remains the same as of the Derg Legal Tender. And also the coins remain unchanged. ( The Article is taken from Ato Belay Gdey Book called Currency and Banking Ethiopia, September 1987.)