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.
• 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.
• Land was given to the Bank free of harges and permitted to build
offices and warehouses.
• Government and public funds were to be deposited with the bank and
all payments to be made by checks.
• 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)
• The Commercial Bank of Ethiopia (CBE)
• 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
1. Endybis III Century A.D. Mahayeger V " " Ella Gabez VII Century A.D.
9. 7.
1 1
2. Aphia III Century " Allaimyris V " " Enaeb VII " "
0. 8.
1 1
3. Ousanas IV Century " Qusana V " " Armah VII " "
1. 9.
1 2
4. Wazeba I " " Ousas V " " Lazila VII " "
2. 0.
1 2
5. Ezana IV " " Nezana V Century A.D. Zaya Abyo Le Medhen VII "
3. 1.
1 2
6. EonBisi IV " " Kaleb VI Century " Quzena VIII Century A.D.
4. 2.
1 2
7. Esabel V " " Israel VI Century " Gersem VIII " "
5. 3.
1 2
8. Wazeba II " " Loel VI " " Hatas VIII " "
6. 4.

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
• Commodity Money
○ Salt as currency
○ Cloth as money
○ Iron as Medium of Exchange
○ Beads and Wares
• Maria Theresa Thaler
• Other Coins
○ Coins in 1890 –1935
○ Silver Coins
○ Copper Coins issued in 1896
○ Nickel Coins
○ 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 Italo-
Ethiopian 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 100 cents

Half birr 50 cents
Quarter birr 25 cents
One-tenth birr 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 Eth. $ 1.00
Five Ethiopian dollar note Eth. $5.00
Ten Ethiopian dollar note Eth. $10.00
Twenty Ethiopian dollar note Eth. $20.00
Hundred Eth. $100.00
Five Hundred 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 Eth.$ 0.01
One twentieth " " " Eth.$0.05
One tenth " " " Eth.$0.10
One quarter " " " Eth.$0.25
One half of " " " Eth.$0.50

Currency of the Derg Era and the present.

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 Birr 100.00
Fifty birr note Birr 50.00
Ten birr note Birr 10.00
Five birr note Birr 5.00
One birr note 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 hundredth of a birr note Birr 0.01
One twentieth of a birr note Birr 0.05
One tenth a birr note Birr 0.10
One quarter a birr note Birr 0.25
One half a birr note Birr 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.)