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ADDIS ABABA – Experts believe that allowing foreign banks to operate in Ethiopia would significantly benefit the local financial sector. They argued that this move would boost competitiveness among local banks, integrate them into the global financing system, and stimulate economic growth.
Economist and former World Bank Advisor Gabriel Nigatu highlighted that foreign banks would provide local banks with access to capital for large-scale infrastructure projects and industries. He also emphasized the potential for increased financial inclusion, improved credit services, job creation, and the transfer of skills and technology.
AAU Finance and Investment Assistant Professor Sewale Abate (PhD) echoed these sentiments. He noted that opening the economy to foreign banks would encourage the consolidation of local banks, leading to improvements in human resources, technology, and capital. While acknowledging the progress of Ethiopian banks over the past 30 years, he pointed out their limitations compared to global banks in terms of technology, capital, and service variety.
Foreign bank entry, he argued, would provide an opportunity for local banks to become more competitive and access the global financial system, ultimately improving financial accessibility.
He also stressed the benefits of job creation, knowledge sharing, and technology transfer, as well as the potential to finance key economic sectors and boost national productivity.
Both experts agreed that local banks need to prepare for increased competition. Gabriel emphasized the need for local banks to revise their structures and operations, particularly by adopting digital banking systems (internet and mobile banking), improving core banking systems and infrastructure, and enhancing customer relations.
He also suggested introducing new products and services, including investment products, and reviewing pricing strategies for loans and bonds.
Sewale stressed the importance of increasing capital reserves for local banks to compete effectively. He also highlighted the need for improved technological capacity and customer-focused services.
He recommended investing in human capital development through skills training and suggested that local banks collaborate, especially in the initial stages, to better withstand the competition. He also emphasized the value of learning from the experiences of other countries and the importance of supportive government policies.
BY BETELHEM BEDLU
THE ETHIOPIAN HERALD FRIDAY 31 JANUARY 2025