Ethiopia's Foreclosure Framework: The Property Mortgaged or Pledged with Banks Proclamation and Its Application to Micro-Financing Institutions

Ethiopia's foreclosure framework rests on two instruments issued in 1998: the Property Mortgaged or Pledged with Banks Proclamation No. 97/1998 and the Business Mortgage Proclamation No. 98/1998. Both were issued to address a common mischief. The preamble to Proclamation No. 97/1998 records that it takes rather too long to obtain judgment from courts for the sale of property mortgaged or pledged with banks and to subsequently execute that judgment. It further records that banking business, which thrives on interest payments from loans provided from public money received by way of savings deposits, has been adversely affected. The stated purpose is to create a conducive environment for economic development by enabling banks to collect their debts efficiently and thereby promoting a good business culture.

The framework has been extended beyond banks. Article 28(2) of the Micro-Financing Business Proclamation No. 626/2009 provides that the Property Mortgaged or Pledged with Banks Proclamation No. 97/1998 and the Business Mortgage Proclamation No. 98/1998 shall, mutatis mutandis, apply with respect to property mortgaged or pledged with micro-financing institutions. Micro-financing institutions therefore have access to the same extrajudicial enforcement machinery as banks, even though they operate under a separate licensing and supervisory regime.

This update examines the foreclosure framework, its core mechanism, the powers of the registrar, the treatment of pending suits, the 2000 amendment concerning the bank's right to acquire property where the auction fails, and the extension of the framework to micro-financing institutions. It also considers the gap between the text and practice, which is central to understanding how the framework operates today. Please read the full details in the attachment.