Summary:
Ethiopia’s Startup Proclamation No. 1396/2025 aims to accelerate economic growth by building a conducive ecosystem for startups and ecosystem builders. It establishes a streamlined system for the designation, accreditation, and support of startups to ensure sustainable technological and economic progress
1. Purpose and Policy Rationale
The Proclamation establishes a national legal and institutional framework to promote tech-enabled startups and build a conducive startup ecosystem in Ethiopia. It recognizes startups as engines of innovation, job creation, competitiveness, and long-term economic growth, and introduces designation, incentives, funding mechanisms, and regulatory flexibility to support them
2. Scope and Application
- Applies at both federal and regional levels
- Governs startups, startup ecosystem builders, and related public institutions
- Prevails over any inconsistent laws or customary practices
3. Key Definitions
- Startup: A person or group with limited business history engaged in creating economic value through innovative, tech-enabled, and scalable products, services, or processes.
- Startup Ecosystem Builder: Entities that actively support startups, including incubators, accelerators, co-working spaces, venture capitals, and research agencies.
- Economic Value: Positive impact on economic growth measured by indicators like job creation, export growth, efficiency, and social welfare enhancement
4. Key words
Startup, Startup Ecosystem, Startup Designation, Startup Certificate, Application for Designation, Renewal of Designation, Suspension of Designation, Revocation of Designation, Startup Ecosystem Builder, Incubators, Accelerators, Co-Working Spaces, Angel Investors, Ministry of Innovation and Technology, National Startup Designation Committee, Digital Startup Platform, Regulatory Sandbox, Innovation Testing, Competency Certificates, Foreign Startups, Foreign Ecosystem Builders, Legal Protection for Startups
5. Institutional Framework
5.1 Ministry of Innovation and Technology
The Ministry is the lead implementing body. Its powers include:
- Coordinating startup ecosystem actors
- Granting, renewing, suspending, and revoking startup and ecosystem-builder designations
- Managing the Startup Grant Program
- Conducting annual performance evaluations
- Creating and administering a Digital Startup Platform (one-stop information and service window)
5.2 National Startup Designation Committee
- Established to evaluate applications for designation
- Composed of representatives from:
- Relevant ministries
- Higher education and research institutions
- Startup industry experts
- Civil society institutions
- Chaired by the Ministry
- Reviews applications submitted via the Digital Startup Platform and recommends decisions
6. Startup and Ecosystem Builder Designation
6.1 Startup Designation
To qualify, an entity must:
- Be tech-enabled
- Offer innovative products, services, or business models
- Meet criteria set
Designation outcomes:
- Issuance of a Startup Certificate
- Eligibility for incentives and protections
Lifecycle of designation:
- Renewal (subject to performance)
- Suspension (for non-compliance)
- Revocation (for serious or uncorrected violations)
6.2 Obligations of Designated Startups
Designated startups must:
- Fully comply with applicable laws
- Actively pursue stated growth and innovation objectives
- Properly utilize incentives and support received
- Submit required reports and evaluations
6.3 Startup Ecosystem Builders
Includes:
- Incubators, accelerators, co-working spaces
- Venture capital, private equity, angel investors
- Universities, research institutions, TVETs
- Financial institutions and NGOs
They follow a parallel designation, renewal, suspension, and revocation process, with specific obligations tied to ecosystem development support .
6.4 Grievance Committee
- Independent committee (minimum 7 members)
- Handles complaints related to designation, suspension, and revocation
- Accountable to the Ministry, operating under issued directives
7. Incentives for Designated Startups
7.1 Startup Grant Program
- Established by the government
- Objective: support early-stage growth, innovation, and commercialization
- Grants are distributed based on criteria set by regulation and directives
7.2 National Credit Guarantee Fund
- Provides credit guarantees to startups and ecosystem builders
- Reduces financing risk for lenders
- Beneficiaries must comply with strict usage and reporting obligations
- Misuse and prohibited acts are expressly barred
7.3 Tax and Fiscal Incentives
Designated startups and ecosystem builders may benefit from:
- Tax incentives (details to be specified in regulations)
- Loss carry-forward for startups
- Loss carry-forward for investors
- Duty-free import privileges for eligible capital goods and inputs
8. Regulatory Sandbox and Market Access
8.1 Regulatory Sandbox
- Allows startups to test innovative products or services under relaxed regulatory conditions
- Designed to balance innovation with consumer and systemic protection
8.2 Skills, Work Permits, and Foreign Participation
- Competency certificates and work permits facilitated for startup operations
- Framework provided for foreign startups and ecosystem builders to operate in Ethiopia under defined conditions
- Legal protections granted to designated startups against arbitrary interference
9. Legislative History and Effect (proclamation Meta data)
- Effective Date: Entered into force on 2 September 2025
- Repealed laws: Inconsistent laws rendered inapplicable to matters governed by this Proclamation
- Amended:
- Implemented by:
- Repealed: No
- Language: Amharic and English
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