Ethiopia has historically limited foreign participation in its banking sector to protect local institutions and manage macroeconomic risks. However, with the 2019 launch of the Homegrown Economic Reform Program and a 2022 policy announcement by Prime Minister Abiy Ahmed, the government is now opening the sector to foreign banks.

This policy shift is formalized under Banking Business Proclamation No. 1360/2025 and NBE Directive No. SBB/94/2025, allowing foreign banks to enter as subsidiaries, branches, or representative offices. The directive’s goals are to boost competitiveness, improve financial inclusion, and prepare for Ethiopia’s WTO accession and integration into AfCFTA.

Key Provisions:

  • Subsidiaries: Must be locally incorporated, meet a minimum paid-up capital of ETB 5 billion (in foreign currency), and undergo a two-stage licensing process. Foreign ownership in Ethiopian banks is capped at 49%.

  • Branches: Treated as part of the parent bank and require capital equivalent to ETB 5 billion. They must operate either as deposit-taking or non-deposit-taking, not both. A letter of undertaking from the parent bank is mandatory.

  • Representative Offices: Allowed only for non-banking activities like market research. They require a $100,000 capital deposit and must not engage in lending or accepting deposits.

  • Data Localization: All core banking data must be stored in Ethiopia. Foreign branches may use their parent bank’s infrastructure, but mirrored data must be kept locally. Transfers abroad are allowed only with NBE approval.

  • Fees: Licensing, renewal, and investigation fees are structured by entity type and must be paid in foreign currency. For example, a subsidiary pays $10,000 to apply and $25,000 for a license.

  • Oversight: The NBE has broad discretion and retains the right to pause licensing activities. It coordinates with foreign regulators, especially for systemically important banks.

Overall Impact:

The directive introduces a cautious but structured opening of Ethiopia’s banking market to foreign players, balancing openness with financial system safeguards. Its effectiveness will depend on foreign interest and the NBE’s enforcement capability.