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HomeBusinessEthiopia Opens up Financial Sector to Foreign Investors – Ethiopian Monitor

Ethiopia Opens up Financial Sector to Foreign Investors – Ethiopian Monitor


ADDIS ABABA – The Council of Ministers on Saturday passed a landmark decision to open the Ethiopian Banking Sector to foreign investors.

The move is a part of the government’s economic reform that is opening previously state-controlled sectors to overseas investors.

In a statment Saturday, the Prime Minister’s office said a draft policy to open up the sector was tabled for final discussion and approval during the PM Abiy Ahmed cabinet’s regular session.

Opening the sector to foreign investment is expected to support banking services in Ethiopia with knowledge and technology.

According to the PM Office, the policy would take the Ethiopian economy’s link with the international market to “a higher level”.

The move would also bring about competitiveness and efficiency in the financial sector while boosting the inflow of foreign capital, and job opportunities the council observed.

The Ministers approved the policy after an extensive discussion after adding their inputs to the draft document. The council has also passed the decision for the new policy to be implemented, said the PM Office.

The National Bank of Ethiopia (NBE) has been working on amending the law and regulatory system in a bid to change the banking policy.

Authorities believe that the closed-door policy has so far benefited local private and public banks in Ethiopia, urging them to get ready for eventual competition with foreign banks.

As per the NBE, the financial sector has shown strong growth in the last four years, during which the number of commercial banks increased from 18 to 30, and their branches reached 8,944 from 5564, as of June 30, 2022.

The total asset of banks also grew from 1.3 trillion Birr to 2.4 trillion Birr, registering 92% growth. Their cumulative annual net profit has jumped by 122% to 49.9 billion Birr in the recently concluded financial year as compared to 2019.

The fact that Ethiopia has closed its doors to foreign banks has benefited the sector until now, Abiy told lawmakers in February. “But after this, banks need to prepare themselves with modern ways and information technologies,” Abiy added.

Half a year later, his cabinet approved the policy to open up the sector for oversea investors – a decision the Ethiopian Investment Commission hailed as “historic”.

“This historic decision will boost the competitiveness of the financial sector by unlocking the potential of the financial market,” said the commission.

“On top of improving macroeconomic imbalance, the decision will help in creating an efficient, technologically equipped, and competitive banking industry that triggers critical chain effects on all economic activities,” it said.

Apart from the commercial banks, one development bank, 18 insurance companies, one reinsurance company, 40 microfinance institutions, six Capital goods Finance/Lease companies, and eight payment instrument issuers/system operators are currently operating in Ethiopia.

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