During its weekly meeting, the Council of Minister of Ethiopia today approved the long-awaited policy that allows foreign banks to operate in Ethiopia for the fist time.
In the document approved today it is stated that the opening of banking sector for foreign investors will strengthen linkage of Ethiopia’s economy with the rest of the world , as well as brings new technologies and knowhows in the industry.
The opening of banking industry for foreign investors is also expected to improve the forex shortage in Ethiopia, and access to finance, according to the justification indicated in the document.
Like other policies once the decision is approved by the Ethiopian Parliament and issued on Negarit gazette, foreign banks are expected to enter the market of over 110 million plus population. In Ethiopia the finance sector that includes banking, insurance, and microfinance, has been among the protected strategic areas closed for foreign companies.
For the past decades, many countries including the United States and Europeans have been waiting for the Government of Ethiopia to liberalize the financial sector and let their banks operate in Ethiopia.
So far, the banking sector is one of the lucrative industries with return on investment of between 20 to 50 percent. Currently there are about two dozen of private banks in Ethiopia, while the state-owned Commercial bank of Ethiopia has close to half the market share in the industry.
It is recalled that about a week ago, the first private foreign telecom operator Safaricom has started operation in Ethiopia following Ethiopian Government’s decision to open the telecom sector for foreign operators.