Market Intelligence
Ethiopia Banks

Ethiopia Banking Sector Opportunities

Ethiopia Makes Moves to Open its Banking Sector to Foreign Investors.

For decades, Ethiopia’s banking and finance sector has been almost entirely closed to foreigners. But that is soon expected to change as the Government of Ethiopia is aiming to introduce a suite of reforms that will open the sector to international competition with the goal of attracting foreign capital to improve the country’s competitiveness and contribute to its economic growth. Opportunities will be significant. Currently, there are thirty banks operating in the country consisting of 8,250 branches, serving the country’s population of nearly 115 million. The National Bank of Ethiopia’s (NBE) quarterly bulletin published in October 2022 reports deposits equivalent to over $30 billion, and loans equivalent to over $25 billion. The total capital of the banking system is estimated to stand at $3.2 billion.

Total Capital in the Banking System:

  • Private Banks - 53%
  • Commercial Banks of Ethiopia - 30%
  • Development Bank of Ethiopia - 17%

A draft policy document circulated by the National Bank of Ethiopia outlines four ways that foreign entities might enter the Ethiopian banking sector:

  • Opening a subsidiary of a foreign bank owned up to 100%.
  • Making an equity investment into a new or existing banks, which can be made up to 5% by a nonbank foreign national, up to 30% by a foreign bank, and up to 40% aggregate foreign investment.
  • Opening a branch of a foreign bank.
  • Opening a representative office of a foreign bank.

Opportunities for U.S. firms include both goods and services: consulting, financial technologies including back end or transaction support hardware and software, payment services, and specialized services in areas such as marketing, and merger & acquisitions. Liberalization of the telecom sector has further driven interest in the use of mobile money which will require relevant software and fintech solutions.

Challenges exist including a foreign exchange shortage in the country, development of stringent policies by the NBE to minimize risks associated with allowing foreign competition, and what is anticipated to be a slow permitting process. Ethiopia’s current credit supply, product offerings, financial infrastructure, and staff capacity are other potential hurdles that new entrants to the market will have to be cognizant of.

The National Bank of Ethiopia is taking a lead on this liberalization process. In October 2022, discussions with local banks and relevant stakeholders were held to collect feedback on the plan and to inform a way forward. CS Ethiopia will continue to monitor and report on these financial sector reforms as they evolve. For more information, please contact CS Ethiopia at: