Ethiopia Country Commercial Guide
Learn about the market conditions, opportunities, regulations, and business conditions in ethiopia, prepared by at U.S. Embassies worldwide by Commerce Department, State Department and other U.S. agencies’ professionals
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Trade Financing
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Methods of Payment

There are various methods of receiving payment for products sold in Ethiopia, the selection of which is usually determined by the degree of trust in the buyer’s ability to pay.  Payment alternatives that U.S. exporters might consider, in order of the most secure to the least secure, include:

Confirmed irrevocable letter of credit (if concerned about the importer and international standing of their bank)AnchorIrrevocable letter of credit (if concerned only about the reliability of the importer)AnchorDocumentary collection (cash against document)AnchorInternational Telegraphic Transfer (when the transaction is below $5,000 and for certain types of goods, such as urgent medicine).

Generally, U.S. exporters selling to Ethiopia for the first time are advised to transact business only on the basis of an irrevocable letter of credit, confirmed by a recognized international bank. Any other form of payment carries a considerable level of risk.  Using a letter of credit may result in delayed collection of receivables due to a shortage of foreign exchange.  Further, some U.S. companies have expressed difficulty getting U.S. banks to accept Ethiopian letters of credit.  For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide.

Banking Systems  

The GOE allowed the establishment of private banks and insurance companies in 1994 but does not yet permit foreign ownership in this sector, except for foreign nationals of Ethiopian origin.  The Ethiopian banking sector is currently comprised of a central bank (The National Bank of Ethiopia, or NBE), one state owned development bank, a government owned commercial bank, over 30 banks, including newly established banks Amhara Bank, Zamzam Bank and Hijra Bank. In March 2021, NBE released a new directive further uplifting the minimum paid up capital requirement to start a banking business to 5 billion Ethiopian birr ($90 million).

Foreign banks are not permitted to provide financial services in Ethiopia, but GOE statements indicate that the sector may open in the medium term as the government pursues broad economic reforms.  Currently, Ethiopia has allowed a small number of foreign banks to open liaison offices in Addis Ababa to facilitate credit to companies from their countries of origins.  Chinese, German, Kenyan, Turkish, and South African banks have opened liaison offices in Ethiopia.

The state-owned Commercial Bank of Ethiopia (CBE) dominates the market in terms of assets, deposits, bank branches, and total banking workforce. CBE holds more than 60% of total bank deposits, bank loans, and foreign exchange.  The other government-owned bank is the Development Bank of Ethiopia (DBE), which directs credits to investors operating in priority sectors.  DBE extends short, medium, and long-term loans for development projects, including industrial and agricultural projects. DBE also provides other banking services such as checking and saving accounts to its clients.  The DBE has been plagued for years by a portfolio with a high percentage of non-performing loans (NPLs), inefficient capital allocation, and corruption.   As such, it has been a major target of the GOE reform campaign and is currently undergoing an extensive restructuring process.

NBE aims to foster monetary stability and a sound financial system, maintaining credit and exchange conditions conducive to the balanced growth of the economy. NBE controls the bank’s minimum deposit rate, which now stands at 7%, while loan interest rates are allowed to float. Real deposit interest rates have been negative in recent years due to inflation, which stood at 36% in April 2022.  NBE may engage with banks and other financial institutions in the discount, rediscount, purchase, or sale of duly signed and endorsed bills of exchange, promissory notes, acceptances, and other credit instruments with maturity periods not exceeding 180 days from the date of their discount, rediscount, or acquisition by the bank.  The bank may buy, sell, and hold foreign currency notes and coins and such documents and instruments, including telegraphic transfers, as they are customarily employed in international payments or transfers of funds.  Conditional upon NBE authorization, many commercial banks offer mobile and agent banking in their line of services.  In April 2020, the NBE issued a new directive for businesses to allow new domestic, non-financial entrants to offer mobile money services and engage in the electronic payment system.  This electronic payment system extends a variety of services.  Lack of access to finance is a significant constraint for local businesses.  

Foreign Exchange Controls

Foreign exchange reserves maintained by the government of Ethiopia remain in short supply, a longstanding challenge for those seeking to source from abroad.  The decrease in foreign exchange reserves has been exacerbated by international debt obligations contracted to fund previously built infrastructure projects.

AnchorAll payments abroad require permits and all transactions in foreign exchange must be carried out through authorized dealers supervised by the NBE.  Imports must be funded through accounts held in Ethiopia.  The NBE has delegated most of the foreign exchange transaction functions to the commercial banks but maintains authority to approve large foreign exchange allocations.  NBE also requires commercial banks to surrender 50% of their foreign exchange (recently lowered from 70%) earnings obtained from export transactions with the exporter having a right to use remaining 40% leaving only 10% of the export earnings to be used by the commercial banks.  Importers and exporters can obtain import/export permits through the commercial banks.  Foreign investors may repatriate all their profits abroad according to the Investment Proclamation 1180/2020, however, lack of forex makes this difficult in practice

AnchorForeign exchange shortages due to weak export performance and high demand for foreign currency will continue to present significant market challenges, particularly for potential Ethiopian buyers of U.S. goods and services.  Private sector actors widely complain about the shortage of foreign exchange and point out the adverse implications on their businesses.  As a result of the critical shortage of foreign currency, NBE regulations require commercial banks to allocate foreign currency to importers based on priorities, and debt obligations.  State owned enterprises and government sponsored infrastructure projects usually are given priority over the private sector when competing for access to foreign exchange.  Given the poor performance of exports in past years and growing demand for import of capital goods, foreign exchange availability will continue to be a challenge for businesses in the future.  

During the period of November 2019 through spring 2020 the NBE increased the rate of the devaluation of the birr.  Local sourcing of inputs and partnering with export-oriented partners are strategies employed by the private sector to address the foreign exchange shortage.  As part of a potential International Monetary Fund (IMF) bailout, the GOE will have to harmonize the official and black-market rates to a significant degree.  IMF and GOE officials continue to negotiate over the timing and sequencing of exchange rate reform.   AnchorAnchor

U.S. Banks & Local Correspondent Banks

Similar to other foreign banks, U.S. banks are prohibited from operating in Ethiopia.  The following are some Ethiopian banks with correspondent relationships with U.S. banks: AnchorAnchor

Financing Resources

To access Ethiopia’s ICS section on financing, visit the U.S. Department of State Investment Climate Statement website.