The government of Ethiopia has been undertaking bold macroeconomic reforms aimed at ensuring sustainable economic growth. As part of these reforms, the House of Peoples’ Representatives (HoPR) has recently approved the proclamation of the National Bank of Ethiopia (NBE) that allows foreign banks to operate within the country’s financial sector.
In its 11th regular session, the HoPR unanimously passed the proclamation, which is expected to drive a modernized banking and financial system, thereby stabilizing and strengthening the country’s economy.
NBE Governor Mamo Mihretu said that the government has accomplished an impressive progress in recent years creating healthy and competitive financial sector. The sector is progressively improving each year and fostering a robust economy. In addition to opening the door for foreign banks to operate in the country’s financial sector, the move is a pivotal step toward liberalizing Ethiopia’s banking industry and attracting foreign investors.
“The proclamation will gradually establish a robust banking sector, laying the foundation for strong domestic financial institutions. It sets the stage for the development of powerful banks that will further strengthen the nation’s economy,” Mamo stated.
Ethiopian Economics Association (EEA), Senior Researcher Abule Mehari (PhD) said that the entry of foreign banks fosters a competitive environment, prompting local banks to concentrate on a market-driven economy and to reach the unbanked population. Additionally, it encourages local banks to invest more in technology to improve accessibility.
He stated that many local banks operating within the country are relatively financially weak and lack advanced technology for their operations. Likewise, the accessibility of digital financing offered by these banks is also underdeveloped and lagging behind compared to that of neighboring countries.
Commending Telebirr app, a mobile payment service launched by Ethio Telecom, he expressed that the app is transacting trillions of Birr within short periods of time, playing crucial role in facilitating digital money transfers in the country. Now the app offers a wide range of services and has become a favorite among millions of customers. Accordingly, it is important to work more on digital financial accessibility and strengthening the capacity of local banks operation and equipping them with modern technology, Abule suggested.
Banking and Finance Consultant Tilahun Girma said that the banking system must be stronger than ever to enhance competitiveness. There are numerous banks functioning in the country, and if they share similar operational systems, organizational philosophies, and other similar characteristics, they should voluntarily merge to form a robust and competitive bank since they need to be prepared for strong competition, he added.
Tilahun believed that the presence of foreign banks will play a crucial role in stimulating the economy, as these international banks possess more advanced technology than the local ones. “Although we may lack modern technology, we have the capability to compete with these international banks,” he noted.
BY HAILE DEMEKE
THE ETHIOPIAN HERALD FRIDAY 3 JANUARY 2025
