Ethiopia to allow foreign banks for first time in 50 years

Ethiopia’s central bank has issued a long-awaited directive allowing foreign banks and investors to formally enter its financial sector, marking a major step in the country’s broader economic liberalisation programme. The move comes after years of reform commitments and follows the December 2024 ratification of a new banking law by parliament.

It is the first time Ethiopia is opening its banking system to foreign financial institutions since the sector was nationalised under the Derg regime in 1974. Despite being home to over 128 million people and the largest economy in East Africa by GDP, Ethiopia has long maintained a closed banking sector. Analysts say the move could inject new capital, boost competition, and accelerate the development of a sector that remains heavily dominated by the state-owned Commercial Bank of Ethiopia.

The new licencing rules were published by the National Bank of Ethiopia (NBE) on Wednesday, June 25. They now provide a clear regulatory path for foreign banks to set up subsidiaries, open branches, or establish representative offices in the country. Foreign strategic investors can also acquire stakes in existing local banks, with individual ownership capped at 30%, and total foreign ownership capped at 40%.