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Ethiopia to open up banking sector for foreign financial institutions
The National Bank of Ethiopia (NBE) said it has finalized preparations to open up the banking industry for foreign financial institutions.
The latest push is a part of the government’s reform that is opening previously state-controlled sectors to overseas investors to boost the inflow of foreign capital.
The plan to allow foreign financial institutions to work in Ethiopia was first announced by Prime Minister Abiy Ahmed last February, telling local banks to get ready for foreign competition.
NBE Supervision Director Frazer Ayalew on Friday told local reporters that preparations are being made for foreign financial institutions to enter the sector in line with international experience.
“The preparations included revision of legal and regulatory systems to create an enabling environment for foreign financial institutions to operate in the country,” Ayalew said.
Opening up the sector will help attract investment, boost foreign exchange, provide sufficient credit in any sector of the country, and make the banking system more advanced and competitive, central Bank officials say.
The banking sector has also shown a strong growth in the last four years, according to the NBE report.
Currently, there are 30 private banks and two state-owned banks, with nearly 9000 branches across the country.
Their cumulative annual net profit has jumped by 122 percent to $1 billion in the recently concluded financial year as compared to 2019.
They now have a total capital of nearly $4 billion in 2022, and shown a 27 percent average growth annually.
The fact that Ethiopia has closed its doors to foreign banks has benefited the sector until now, Ahmed told lawmakers in February.“But after this, banks need to prepare themselves with modern ways and information technologies,” the Prime Minister warned.
