Ethiopia to issue banking licenses to foreigners

Ethiopia has announced plans to issue up to five banking licenses to foreign investors in the next five years as part of a move to open up the country’s financial services sector to foreign competition. The announcement was made by Solomon Desta, vice governor of the central bank, who said that foreign investors would be given three to five licenses within the given timeframe. Currently, the banking industry in Ethiopia is dominated by the state-owned Commercial Bank of Ethiopia, and all 29 players in the sector are locally owned.

The move by Prime Minister Abiy Ahmed’s government is part of a wider push to open up sectors previously controlled by state firms in order to attract more foreign investment inflows and drive economic growth. Desta explained that foreign investors would have several options to enter the industry, including forming joint ventures with domestic players or establishing local subsidiaries. Investors have long been interested in Ethiopia’s sectors such as banking, telecoms, transportation and aviation.

Two years ago, Ethiopia broke the monopoly of state-owned Ethio Telecom in the telecoms sector by granting a licence to a private operator, a consortium led by Kenya’s Safaricom, Vodafone, and Japan’s Sumitomo, which paid $850 million for the licence. Ethiopia is now selling a 45% stake in Ethio Telecom and has launched a tender process to issue a third telecoms licence.

The move to open up Ethiopia’s banking industry to foreign investors is expected to bring significant changes to the sector, which has previously been closed off to foreign competition. This, in turn, is expected to create more opportunities for local businesses, improve access to finance and contribute to the overall growth of the economy. The government’s plans to issue up to five banking licenses to foreign investors within the next five years are set to significantly reshape Ethiopia’s banking landscape.