Business & Money
Ethiopia to Allow Foreign Banks and Investors Amid Financial Liberalization Efforts
For the first time, Ethiopia will permit foreign banks to establish local subsidiaries and allow foreigners to acquire shares in domestic lenders, following the cabinet’s approval of a bill on June 14 aimed at liberalizing the economy.
:Ethiopia’s New Banking Law: Foreign Banks to Include Local Ethiopians on Boards, Foreign Ownership Limited to 40%, Strategic Investors Capped at 30%
By Charles Wachira
Ethiopia will for the first time allow foreign banks to set up local subsidiaries and foreigners to acquire shares in domestic lenders, following a bill approved by the cabinet on June 14 as part of the government’s plan to liberalize the economy.
With over 100 million people, Ethiopia is a major economy in Sub-Saharan Africa and a target for foreign investors after decades of being closed off.
The bill permits well-established, reputable, and financially sound foreign banks to establish subsidiaries, branches, or representative offices, or to acquire shares in local banks.
The draft law, pending approval by lawmakers, mandates that foreign bank subsidiaries include local Ethiopians on their boards. Foreign nationals and foreign-owned Ethiopian organizations can hold up to 40% of a bank’s total shares, with direct shareholding by strategic investors capped at 30%.
These measures aim to strengthen the National Bank of Ethiopia’s growth, credibility, accountability, transparency, and governance.
Currently, Ethiopia’s banking sector, dominated by the state-owned Commercial Bank of Ethiopia, comprises 29 locally owned banks. In May last year, the central bank announced plans to issue five banking licenses to foreign investors within five years.
Keywords: Foreign Investment: Banking Liberalization: Ethiopia Economy:Subsidiaries: National Bank of Ethiopia