As Ethiopia opens up banking sector to foreign players, there is an important caveat

National Bank of Ethiopia building
  • Foreign banks seeking to operate in Ethiopian following liberalisation of the country's banking sector would be required to do so in partnership with local banks.
  • Business Insider Africa observes that this could give room to some mergers and acquisitions in the Ethiopian banking sector.
  • Ethiopia is in the process of liberalising its banking sector, with the aim of ending a decades-long restrictive banking policy that has prevented foreign banks from operating in the country.

One of the newly proposed rules that would guide Ethiopia's banking sector liberalisation is that foreign banks hoping to operate in the Horn of Africa country must do so in partnership with local banks.

This was disclosed by the lead consultant that is overseeing the liberalisation process, who also mentioned that only regional banks are eligible to the opportunity for now.

“The opening up might only be limited to regional banks in a joint venture basis with local banks... That will be easily manageable for the central bank. The first target is to boost the foreign currency inflow. There are many legal framework revisions underway and many are in a draft stage,” the consultant was quoted by Ethiopian newspaper The Reporter.

The important caveat is coming just months after the Ethiopian Government announced that it had constituted a liberalisation committee whose job it is to establish the modalities that would guide the liberalisation process.

The implication, therefore, is that we might be seeing some mergers and acquisitions in the Ethiopian banking sector anytime soon.

Business Insider Africa reported earlier that the Ethiopian banking sector liberalisation committee has begun working towards replacing the country's decades-old financial services code with a new one.

The primary aim of the new financial services code is to end Ethiopia's restrictive banking policy which has, up till now, prevented foreign banks from investing and setting up shops in the country.

The first draft of the new code is expected to be ready by December 2022. It will, among other things, stipulate the modalities for foreign banks to operate in Ethiopia.

Recall that Prime Minister Abiy Ahmed was the first to disclose Ethiopia's ongoing plan to open its banking sector to foreign banks. Last month, he declared that “we will bring foreign banks because we need additional wealth and hard currency. Regarding this, the government is now preparing a policy amendment. Once preconditions are met and banks are prepared, we will (implement) that.”

The banking reforms in Ethiopia presents an opportunity for some of Africa's biggest banks to position themselves in the Horn of Africa country.


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