Financial planning in

Ethiopia
 Financial planning

Definition
A. Financial planning is the process of estimating the
capital required and determining it's competition.

B. It is the process of framing financial policies in

relation to procurement , investment and
administration of funds of an enterprise.
C. It is a document containing a person's current money
situation and long term monetary goal as well as strategies
to achieve those goal.
D. It begins with a thorough evaluation of the person's current
financial state and future expectations .
 Objectives of financial planning
Financial planning has got many objectives to look forward to:
A. determining capital requirements_ This will be depend up on
factors like:
Cost of current and fixed assets
Promotional expenses and long range
planning.
B. Determining capital structure.
The capital structure is the composition of capital i.e.
the relative kind and proportion of capital required in the business.
This includes decisions of debt _equity ratio
both short term and long term.
C. Farming financial policies with regards to
cash control, lending, borrowings, etc.
D. Financial manager ensure that the scarce financial resource
are maximally utilized in the best possible manner at least cost in
order to gate maximum return on investment .
Ethiopia's financial plan as over the past decade, been
operating under a financial repression frame work used by
the government for managing it's monetary and foreign
exchange policy and financing of large infrastructure projects
and state- owned-enterprise (SOEs).
Instruments under this frame work include the central bank
financing of the government ,state dominated banking sector
mandatory financing of priority projects and directed credit,
administrated interest rate captive domestic market for
government debt, high liquidity and capital requirements.
Process of financial planning in Ethiopia it has five
simple steps:
1. Know where you stand.(understand your current
financial situation
2. set your goals
3. plan for the future
4. managing money
5. Review your plan.
A. currently, the Ethiopian financial sector consists of
 3 public banks 1 including Development bank of Ethiopia (DBE
 16 private banks
 14 private insurance companies
 1 public insurance company
 31 micro finance institutions
 8200 saving credit cooperatives(SACCOs) in both rural and urban
area
 Importance of financial planning
Financial planning is process of
Farming objectives
Policies
Procedures
Program and budget regarding the financial activity of a
concern.
The importance can be outline as
1: Adequate funds have to be ensured
2: financial planning helps in ensuring a reasonable balance
between out flow and inflow of funds so that stability is
maintained.
3: Financial planning ensures that supplies of funds
are easily investing in company which exercise
financial planning.
4: Financial planning helps in making growth and
expansion program which helps in long-run survival
of the company.
5: financial planning helps in reducing the
uncertainties which can be a hindrance to growth of
the company.
6: Financial planning reduces uncertainties with
regard to changing market trends which can be
faced easily through enough funds.
Components of good financial planning
1. financial goal
2.Net worth statement
3.bugdet and cash flow planning
4.debt management plan
5.retirement plan
6. Emergency funds
7. Insurance coverage
8. Estate plan.
Thanks For Your
Attention