ETHIOPIA OPENS BANKING SECTOR TO FOREIGN INVESTMENT FOR THE FIRST TIME IN DECADES
Ethiopia’s central bank has introduced a long-anticipated directive permitting foreign banks and investors to operate within its financial sector. This milestone signals a significant advance in the nation’s ongoing economic liberalisation efforts and follows the parliamentary approval of a revised banking law in December 2024. This marks the first time Ethiopia is opening its banking sector to foreign financial institutions since its nationalisation under the Derg regime in 1974. Despite having a population of over 128 million and being East Africa’s largest economy by GDP, Ethiopia has historically kept its banking industry closed to outsiders.
Experts believe the policy shift could attract fresh capital, increase competition, and help modernise a sector still largely controlled by the state-run Commercial Bank of Ethiopia. On Wednesday, June 25, the National Bank of Ethiopia (NBE) released new licensing regulations that establish a clear framework for foreign banks to operate in the country. Under the new rules, international banks can now set up subsidiaries, open branches, or create representative offices. Additionally, foreign strategic investors are permitted to acquire shares in existing Ethiopian banks, with individual ownership limited to 30% and total foreign ownership restricted to 40%. The National Bank of Ethiopia positioned the new regulations as a strategic step in its broader reform agenda aimed at expanding financial inclusion and drawing international institutions to a high-potential, fast-growing market. “The Ethiopian banking sector is now officially open to foreign participation, and the National Bank of Ethiopia will begin accepting applications from foreign banks and investors effective immediately,” the directive stated.
The directive also marks a regulatory shift by bringing the licensing and oversight of representative offices under the direct supervision of the National Bank of Ethiopia for the first time. This development comes after months of public signals from senior officials, including central bank governor Mamo Mihretu, who recently indicated that foreign banks might commence operations in Ethiopia before the close of 2025. Foreign lenders like Kenya’s KCB Group and South Africa’s Standard Bank have long shown interest in entering Ethiopia once permitted by regulation. With the new directive, the National Bank of Ethiopia plans to grant up to five foreign banking licences over the next five years. This phased approach is expected to align with the country’s broader reform agenda, which includes debt restructuring efforts and a $3.4 billion agreement with the International Monetary Fund.
