reflecting the tight monetary policy measures taken to mitigate the inflationary pressures of recent years. This low level of financial deepening is an indication of the need for further financial sector reforms. 311 The financial sector soundness, robustness and strength indicators do not signal problems in the financial system. This is because the different National Bank of Ethiopia directives put in place in 1996 were rigorously implemented. These directives applied to the supervision of banks, insurance companies and finance institutions. However, as the current period may probably be a high point of Ethiopia’s economic cycle, continued close scrutiny by the NBE will be important in sustaining the sector’s soundness over time. A slowdown of economic growth and unwinding of high inflation could expose credit risks, particularly as interest rates have been highly negative in real terms. But the CRM notes with some concern the tight control of commercial banks by the Central Bank which may limit space to innovate and introduce new financial products. Access to credit 312 Access to credit is a challenge in Ethiopia. The CRM learnt that the country is implementing a strategy that will address the efficient functioning of MFIs; in particular, fostering the role of MFIs in intermediating financial assets in the rural areas. To this end, NBE encourages commercial banks to on-lend to microfinance institutions. It is also recognised that there is a geographical imbalance in MFI coverage with very few credit services available in the less-developed regions and pastoralist communities. The NBE and some regional states are of the view that, given the rapid growth of MFIs and the number of commercial banks operating in the country in recent years, access to credit by the general public has significantly improved. However, interactions with stakeholders across the country revealed that this was not necessarily the case. More, therefore, still needs to be done to improve SME access to credit in Ethiopia. Impact of the global financial crisis 313 Even though one of the issues raised by the CRM is the lack of foreign participation in the financial sector, NBE and MoFED officials are of the view that this may, to a large extent, have insulated the sector - and the country as a whole - from the global financial crises that started with the 2007 sub-prime and the summer 2008 banking crises. While it could be true that contagion effects, normally amplified by the presence of foreign banks, might not have been evident in Ethiopia, there is growing evidence that Ethiopia, like other African countries, has not been spared from adverse impacts of the current global economic crisis. 314 The balance of payments outlook for 2009/10 is troubling as global recession takes a toll on remittances, exports, and direct foreign investment; oil prices - 134 -