The Council of Ministers approved adjustments to banking regulations that will allow for increased foreign ownership in Ethiopia's financial industry. This builds on reforms from two years ago to further open the sector.
The existing policy sets caps on overseas ownership of local banks. Foreign entities can hold up to 30 percent of an Ethiopian lender, with a five percent limit for individual foreign or non-bank investors.
In addition to equity stakes, the policy enabled foreign banks to establish new banks, subsidiaries, or representative offices locally. This provides more paths for market entry.
Subject to parliamentary approval, the proclamation will enable the government to issue up to five new banking licenses to foreign institutions based on its original plan. Foreign companies that expressed interest include Kenya’s KCB Bank and Standard Bank. Most seek over 50 percent shares to gain control and strategic influence.
Officials hope greater international participation will modernize and expand Ethiopia's developing financial system. There is hope that this would boost foreign exchange reserves and attract larger investments, accelerating economic development.