Ethiopia - Country Commercial Guide
Trade Financing

It covers payment methods and information on, banking systems, foreign exchange controls, and U.S. and correspondent banking.

Last published date: 2020-07-20

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 his bank)
•           Irrevocable letter of credit (if concerned only about the reliability of the importer)
•           Documentary collect on (cash against document)
•           International Telegraphic Transfer (when the transaction is below $5,000 and for certain types of goods, such as urgent medicine).

As a general rule, 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 high level of risk. Using a Letter of Credit could sometimes result in delayed collection of receivables due to a shortage of foreign exchange.

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) 
•    Irrevocable letter of credit (if concerned only about the reliability of the importer) 
•    Documentary collection (cash against document) 
•    International Telegraphic Transfer (when the transaction is below $5,000 and for certain types of goods, such as urgent medicine). 

As a general rule, 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 high level of risk. Using a Letter of Credit may result in delayed collection of receivables due to a shortage of foreign exchange.

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, and sixteen private banks. The NBE will increase the minimum capital requirement for banks to operate to 2 billion Birr ($90 million) by the close of 2020. Foreign banks are not permitted to provide financial services in Ethiopia, but the sector may open up in the medium term as the government of Prime Minister Abiy Ahmed 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. 

Based on the most recently released data, the Commercial Bank of Ethiopia (CBE) holds more than 60 percent of total bank deposits, bank loans, and foreign exchange. NBE controls the bank’s minimum deposit rate, which now stands at 7 percent, while loan interest rates are allowed to float. Real deposit interest rates have been negative in recent years due to inflation, which stood at 19 percent in April 2020.

The state-owned Commercial Bank of Ethiopia (CBE) dominates the market in terms of assets, deposits, bank branches, and total banking workforce. 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 (NPL’s), inefficient capital allocation, and corruption.  As such, it has been a major target of PM Abiy’s 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 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. Lack of access to finance is a significant constraint for local businesses. Conditional upon NBE authorization, many commercial banks offer mobile and agent banking in their line of services. In April 2020, National Bank of Ethiopia 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 helps to extend a variety of services.

Foreign Exchange Controls

Foreign Exchange reserves maintained by the government of Ethiopia remain at low-levels, 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. 

All 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 30% of their foreign exchange earnings. Importers and exporters can obtain import/export permits through the commercial banks. In addition, exporters can retain indefinitely 30% of their foreign exchange proceeds, but must sell the remaining 70% to commercial banks within four weeks. Foreign investors may repatriate all of their profits abroad. 

Foreign 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. As part of Ethiopia’s IMF program, the GOE aims to harmonize the official and black market rates. 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. 

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: 

Awash International Bank 
P.O. Box 12638 
Addis Ababa, Ethiopia 
Tel: +251-11-661 - 4682/662 7828
Fax: +251-11-661-4477 
Email: awash.bank@ethionet.et  
http://www.awashbank.com/

Bank of Abyssinia 
P.O. Box 12947 
Addis Ababa, Ethiopia 
Tel: +251-11-551-4130 
Fax: +251-11-551-0409 
Email: info@bankofabyssinia.com
http://www.bankofabyssinia.com/  

Berhan International Bank S.C.
P.O. Box 387 code 1110
Tel + 251- 11- 618- 57 32
http://www.berhanbanksc.com/

Commercial Bank of Ethiopia (CBE) 
P.O. Box 255 
Addis Ababa, Ethiopia 
Tel: ++251-11- 122 87 55/ 251-11-122 90 34 / 251- 115- 51 50 00
Fax: 251-111 22 85 84
E-mail: cbe_cc@combanketh.com
https://www.combanketh.et/

Dashen Bank 
P.O. Box 12752 
Addis Ababa, Ethiopia 
Tel: +251 -11- 467 18 03
Fax: +251-11-465-3037 
E-mail: dashen.bank@ethionet.et 
http://www.dashenbanksc.com/ 

Enat Bank
Phone: +251 115 158278 / 507074 
Fax : +251 115 151338 / 504948
P.O.Box: 18401, Addis Ababa, Ethiopia
Address: Kirkos sub-city, woreda 8, in front of Yordanos Hotel.
Email: info@enatbanksc.com
http://www.enatbanksc.com/

Lion International Bank S.C 
P.O. Box 27026 Code 1000 
Addis Ababa, Ethiopia 
Tel: +251-11-662-6000 
Fax: +251-11-662 7114
Email: anbesabank@ethionet.et; lionbank@ethionet.et 
http://www.anbesabank.com/  

National Bank of Ethiopia (NBE) (Central Bank) 
P.O. Box 5550 
Addis Ababa, Ethiopia 
Tel: +251-11-551-7438
Fax: +251-11-551-4588 
Email: nbe.edpc@ethionet.et
http://www.nbe.gov.et/ 

Nib International Bank 
P.O. Box 2439 
Addis Ababa, Ethiopia 
Tel: +251-11-550-3288/550-3304 
Fax: +251-11-550-4349 
Email: nibbank@ethionet.et 
http://www.nibbank-et.com/ 

United Bank 
P.O. Box 19963 
Addis Ababa, Ethiopia 
Tel: +251-11-465-5222/465-5240
Fax: +251-11-465-5243 
Email: hibretbank@ethionet.et
http://www.unitedbank.com.et/  

Wegagen Bank 
P.O. Box 1018 
Addis Ababa, Ethiopia 
Tel: +251-11-552-3800 
Fax: +251-11-552-3520/552-3521 
E-mail: info@wegagenbanksc.com
http://www.wegagen.com/ 

Zemen Bank S.C 
Addis Ababa, Ethiopia 
Tel: +251-11-550-1111/011-554-0074/55
Fax: +251-11-553-9042
Email: customerservice@zemenbank.com
http://www.zemenbank.com/ 

Financing Web Resources

World Bank project source

African Development Bank:  http://www.afdb.org/en/ 
Export-Import Bank of the United States:  http://www.exim.gov 
DFC: https://www.dfc.gov/who-we-are
SBA’s Office of International Trade:  http://www.sba.gov/oit/ 
U.S. Trade and Development Agency:  http://www.ustda.gov 
World Bank:  http://www.worldbank.org/ 
Export-Import Bank of China:  http://english.eximbank.gov.cn/en/
Millennium Challenge Corporation (MCC): https://www.mcc.gov/