The National Bank of Ethiopia (NBE) issued a directive effective 25 June to allow international banks and foreign investors to apply for banking licences. This ends decades of isolation in which foreign banks were not allowed to compete in order to build the capacity of domestic banks. Foreign banks have been expressing interest in joining Ethiopia’s market for decades and some 20 banks from Africa, Europe and elsewhere have opened representative offices.
The NBE published the Directive Requirements for Licensing and Renewal of Banking Business and Representative Office (SBB/94/2025 – available on the NBE website here) which is within the framework of the Banking Business Proclamation 1360/2025 (law) gazetted on 12 March 2025 (available here). The law and directive permit foreign banks to establish a partially or fully owned subsidiary in Ethiopia, or open a foreign bank branch or a representative office. This law had been flagged for several years and was endorsed in draft by the Council of Ministers in June 2024 and passed by Parliament in December 2024.
Foreign banks and foreign investors can also acquire shares in an Ethiopian bank. Direct shareholding by a foreign strategic investor should not be more than 40% of the Ethiopian bank’s shares. Aggregate holdings by foreign nationals and foreign owned Ethiopian organizations is limited to 49% of the shares in an Ethiopian bank. However, the NBE can allow exceptions with 100% acquisition to attract strategic investments to benefit the economy or to resolve a distressed bank and keep the financial system stable.
Ethiopia is the second most populous country with over 129 million people (source Google Data Commons). The economy is already one of Africa’s largest by gross domestic product (GDP) and is forecast to grow at over 7.4% a year between 2025 and 2030 (IMF World Economic Outlook April 2025).
There is considerable untapped potential for banks, with estimated access to financial accounts lower than average across sub-Saharan Africa and progress likely to be spurred by strong government support to drive public digitalization and digital payments. The National Financial Inclusion Strategy 2021-2025 aims to “increase the proportion of adults who own a formal financial account from 45% (2020) to 70% by 2025.”
On 6 June Kenya’s KCB banking group and the NBE said they were talking about the bank’s entry into the market, the follow-up to similar announcements since 2019. KCB operates in Kenya, Uganda, Tanzania, Rwanda, Burundi, South Sudan and the Democratic Republic of Congo, and has a representative office in Ethiopia since 2015. KCB also operates non-banking subsidiaries in investment banking, asset management, and bancassurance. This article on The Reporter website tips it as the first foreign bank to enter the market.
Banks headquartered in Egypt, Germany, Kenya, Morocco, Nigeria, South Africa and Turkey as well as the Export-Import banks of India and South Korea and the European Investment Bank are among those that have expressed interest or had representative offices. Egypt’s CIB (formerly Commercial International Bank) opened its representative office in 2019. This article in Africa Report says that South Africa’s Standard Bank and Kenya’s Equity Bank are keen, and Morocco’s Attijariwafa Bank has also expressed interest (see for example this report on Fana Media Corporation).
The change comes as part of wider changes to liberalize the banking sector and create a capital market. The Government set up a reform committee in 2023 to revise financial laws and open the sector to international investors. The NBE and other leaders have introduced sweeping reforms to tackle obstacles for foreign banks, such as the parallel market.
As of December 2024, Ethiopia had 32 banks. The state-owned Commercial Bank of Ethiopia dominated the market in terms of total banking assets and deposits with about 50% of each. In early July 2025 the CBE announced on LinkedIn (see article on Stockmarket.et website for English version) that its deposits had climbed to ETB 1.69 trillon ($12.3bn), including ETB 515bn in new deposits in the 2024/2025 financial year.
(Photo: Tom Minney, African Capital Markets News)
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