Kenyan banks free to enter Ethiopian market after removal of foreign cap
By Charles Adinda |
Plans to liberalise the country's financial market began in June 2023 when Ethiopia unveiled plans to issue up to five banking licenses to foreign investors over the next five years.
Kenyan banks are expected to enter Ethiopia's financial sector after the ratification of a new law by the Ethiopian parliament that allows foreign banks to operate in the country.
According to the Addis Standard, the law also known as the Banking Business Proclamation permits foreign banks to establish subsidiaries, open branches or representative offices, or acquire stakes in local banks.
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Foreign strategic investors' ownership is however capped at 40% with an additional 7-10% for non-strategic foreign national investors. The law also limits the combined shareholding of foreign nationals and foreign-owned Ethiopian organisations to 49%, ensuring the majority ownership remains Ethiopian.
Governor of the National Bank of Ethiopia (NBE), Mamo Mihretu, confirmed the progress during the Africa Financial Summit (AFIS 2024) held in Casablanca, Morocco.
"We are finalising the process to open the sector to foreign investors. This is a pivotal moment for our economy," Mihretu announced, urging foreign banks to seize the opportunity to access the country's market of over 120 million people.
Despite the liberalisation, some legislators like Desalegn Chane of the National Movement of Amhara voiced concerns over the impact on local banks.
"I don't think the government is providing enough support for private banks to make them competitive in the market," he said
Currently, 32 banks worth a combined $2.4 billion operate in Ethiopia, with the state-owned Commercial Bank of Ethiopia (CBE) holding 21.5% of the total capital.
Plans to liberalise the country's financial market began in June 2023 when Ethiopia unveiled plans to issue up to five banking licenses to foreign investors over the next five years. At the time, Kenya's KCB Bank and Standard Bank were among the institutions that expressed interest in the country's banking sector.
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