On December 17, 2024, the Ethiopian parliament passed a historic law aimed at opening the country’s banking sector to foreign investors, marking a decisive turning point in the government’s economic policy. This reform comes in a context of economic transition, while Ethiopiastrong in its 120 millions of inhabitantsseeks to stimulate investment and strengthen the competitiveness of its banking system.
Until now largely protected by restrictive policies, the Ethiopian banking sector is now ready to welcome international players. The approved text allows foreign banks to establish themselves in Ethiopia by opening subsidiaries or acquiring stakes in local establishments. However, measures were put in place to protect national interests, limiting the share of foreign investors to 49%, with the remainder remaining under Ethiopian control.
This opening aims to strengthen financial inclusion, as only 50% of Ethiopians currently have access to banking services, a situation that the authorities hope to improve thanks to the arrival of foreign capital. The sector, which currently weighs approximately $26 billion in assetsis dominated by Commercial Bank of Ethiopia (CBE)a public institution, but several private banks are also present.
While this reform is seen by some as a unique opportunity to accelerate the country’s economic growth, it also raises concerns. Some parliamentarians, like Desalegn Chane, are concerned about the impact that foreign competition could have on local banks, particularly the smallest, which risk struggling in the face of the financial power of large international groups.
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