Army bank in the works

The Ethiopian Defence Foundation and the Ministry of Defence are in the process of establishing the first army bank in Ethiopia, according to officials who presented the Ministry’s first half-year performance report to the Foreign Affairs and Peace Standing Committee of the Parliament. The feasibility study has been completed, showing the viability of the bank. The plan to establish an army bank was initially introduced by Siraj Fegessa, the former Minister of Defence, a decade ago, but the initiative did not result in any tangible outcomes at the time.

State Minister of Defence Martha Luwiji stated that the Army Foundation strongly believes in the need for an army bank, and the preparation work is underway. The new bank will require a minimum paid-up capital of five billion birr to obtain a banking license from the central bank, according to a new directive that was issued by the National Bank of Ethiopia (NBE) one year ago, raising the threshold from 500 million birr.

Capital for the army bank is expected to come from various sources, including the Foundation, although it is not yet clear if the Army Bank will offer shares to the general public or if shareholders will be restricted to institutional stakeholders. Additionally, the NBE is implementing the Foundation’s and the Ministry’s new objectives.

The government is expected to allow local banks to sell up to 40% of their shares to foreign investors shortly. This follows the government’s decision to open up the banking sector to foreign investors. Despite the NBE increasing the capital requirement for obtaining a banking license, the number of commercial banks in the country has risen from 18 to 29 in just two years.