How to Diversify Investments in Ethiopia When Most ESX Listings Are Banks

With seven companies listed on the Ethiopian Securities Exchange, investors have few ways to spread their money across industries. If your investments do not all depend on the same outcome, one setback is less likely to wipe you out. Spreading money cannot remove risk or protect you when everything falls together.

Why it is hard on the ESX

As of October 2026, the ESX register lists seven companies: six banks and Ethio Telecom.

The banks share a regulator, depend on the same economy and face the same birr and interest-rate changes. A rule or shock that affects one may affect several, so a bank share should not be treated as automatically safe. Ethio Telecom adds a different business, but one telecom company does not provide a broad spread across industries. Thin trading can also make it costly to buy and sell small amounts of several shares. Our article on liquidity risk explains why.

Three levels of diversification

You can spread money across companies by owning several names rather than one. Spreading it across sectors, such as banking, telecoms, manufacturing and agriculture, is more limited on the ESX for now. For many investors, the most practical option is to combine asset types: bank deposits, government securities and shares, along with any other assets they can access lawfully and safely. See government securities explained.

We could not confirm which other asset types ordinary Ethiopian investors can easily access, so check with a licensed provider before assuming anything beyond these three.

A worked example

Worked example · invented numbers

You have 100,000 birr invested. Suppose one bank share falls 30 percent.

How the money is held	Loss on that fall
All 100,000 birr in that bank	30,000 birr, or 30 percent
20,000 birr in that bank, the rest elsewhere	6,000 birr, or 6 percent
Spread equally across six banks, and only that one falls	About 5,000 birr, or 5 percent
Spread equally across six banks, and all six fall 30 percent together	30,000 birr, or 30 percent
40,000 birr in banks, 60,000 in deposits and treasury bills, and all banks fall 30 percent	12,000 birr, or 12 percent

Owning six banks limits the damage if only one falls. In the fourth row, all six fall together, and the loss is still 30 percent. The last row shows how mixing asset types reduces the loss in this example.

Hidden concentration

Your risks may overlap even when your holdings look varied. You might own shares in a bank, keep your savings there and receive a salary from it. Your job, property and investments may also depend on the same economy and currency. If you heard about several investments from one person or group, check each one independently.

Building a simple allocation

Start by separating emergency money, money you need within three years and money you will not need for five years or more. Keep shares in that last group. Set a limit for any single share that you could live with if it lost half its value, then review your allocation once or twice a year rather than daily.

Buying small amounts of everything without understanding what you own can make your portfolio harder to follow and increase fees. A few investments you understand may be easier to manage than many you do not.

What improves over time

More listings, new sectors and new kinds of instruments would give investors more ways to spread risk. We have not confirmed whether funds or other pooled products are planned, so watch the announcements from the ESX and ECMA.