ADDIS ABABA – Ethiopia’s liberalization of the banking industry is timely, considering the country’s macroeconomic stability and regulatory, legal, and institutional readiness, the National Bank of Ethiopia (NBE) Vice Governor said.
The Vice Governor, Solomon Desta, made the remark yesterday during the second day of the Ethiopia Finance Forum.
He stated that Ethiopia has been facilitating measures to build a robust economy by introducing price-based monetary policy and a floated exchange rate system, while macroeconomic stability is taking hold.
Solomon expressed that it is the right time for Ethiopia to attract foreign banks. The NBE has been receiving training programs at both global and regional levels on participating in and managing foreign banks.
It has also been exposed to best practices from around the world, working with World Bank and IMF consultants, he added.
“We have come to know many important areas and we have developed our expertise as well. All in all, the fundamentals are strong, the sector is mature. So it is up to us to do the reform cautiously in maximizing our benefit and managing our risks,” Solomon said.
According to him, the country is opening the sector to foreign banks to develop the financial sector, attract foreign capital, and introduce modern systems and innovative financial operations.
Presenting a paper at the forum under the theme : Investing in Ethiopia’s Banking Sector: the Final Frontier for Banking in Africa, NBE Senior Advisor Jotework Ayele said that Ethiopia has introduced landmark banking sector reforms designed to attract foreign investment, foster competitive dynamics, and accelerate the modernization of the financial sector.
Currently, the licensing directive is also being finalized, while stakeholders are expected to contribute deliberations so that it will be ratified very soon, she stated.
According to Jotework, the country has an enabling proclamation that allows all forms of foreign bank participation, such as establishing subsidiaries, investing in existing or new banks, and opening branches or representative offices.
The sector is lucrative for foreign investors, considering the total USD 1.2 billion profit in 2024, the benefits of digital banking potential, opportunities to bring product and service innovation to the market, and access to a large market with still limited banking penetration, she added.
She stressed that Ethiopia’s banking sector has maintained strong profitability despite the coronavirus pandemic and political challenges, highlighting substantial upside potential for early entrants.
Elaborating on untapped market segments, Jotework mentioned that providing tailored financial solutions to Ethiopia’s micro, small, and medium enterprises (MSMEs) presents a substantial market opportunity in a largely underserved segment. She indicated that 84 percent of MSMEs in Ethiopia lack access to formal credit.
There is also a huge financial inclusion gap in rural areas, as over 80 percent of the country’s population lives there. Additional high-growth opportunities lie in serving women and youth, the middle class, and in accelerating the adoption of digital financial solutions, she concluded.
BY STAFF REPORTER
THE ETHIOPIAN HERALD SATURDAY 17 MAY 2025
