Ethiopia to allow diaspora invest in banking, insurance

Ethiopia to allow diaspora invest in banking, insurance


The National Bank of Ethiopia (NBE), the agency in charge of regulating the financial sector of the country, is set to introduce a regulation that will allow Ethiopians in the diaspora to invest in the financial sector.

This is indicated by Yinager Desse (PhD), Governor of NBE, who is appointed recently by the reformist Prime Minister Abiy Ahmed. The draft regulation of NBE, which allows the Ethiopians in the diaspora, will be presented to the relevant organs for comment and is welcomed is expected to be approved, according to Yinager, who briefed reporters in his office this morning.

If the sector is open for Ethiopians in the diaspora, NBE believes that it will reduce the growing engagement of the Ethiopians in the diaspora in the informal money transfer (Hawala) and will boost the remittance income of Ethiopia.

The financial sector of Ethiopia has been closed for Ethiopians living abroad holding a foreign country passport. The financial sector of Ethiopia is also closed to other nationals. For long Ethiopians in the diaspora have been demanding the government to invest in banking, insurance and micro finance.

The decision of the NBE to allow the Ethiopians in the diaspora is expected to boost the performance of the financial sector of Ethiopia. The move is also expected to improve the current liquidity problem and foreign currency shortage in Ethiopia.

Most of all it is also expected to serve as a trial for the inescapable liberalization of the financial sector of the 100 million plus east African country. Investors from across the globe have been expecting Ethiopia for long time to open its financial sector for them.

Some researches have also been advising the country to speed its accession to the World Trade Organization (WTO), which took over a decade now, by liberalizing its financial sector.

Banking in Ethiopia
According to December 2018 report of NBE, as of December 2017 the number of banks remained at 18 of which 16 were private and 2 public. These banks opened 164 new bank branches during the review quarter, raising the total number of bank branches to 4,625 of which about 34.4% were found in Addis Ababa.

The report stated that population to bank branch ratio stood at 20,865.56. Of the total bank branches, the share of public banks was 31.8 percent while private banks accounted for 68.2%

“Meanwhile, total capital of the banking system reached Birr 82.0 billion, of which public banks accounted for 63.5% and private banks 36.5%. The share of Commercial Bank of Ethiopia, the biggest state owned bank, in total capital of the banking system, was 54.1%,” the report says.

Insurance in Ethiopia
In Ethiopia there are 17 insurance companies, of which 16 were private. Their branches increased to 518 from 465 a year ago and their total capital reached Birr 4.7 billion, of which 74.6 percent was that of private insurers. Of the total branches, about 53.9 percent were located in Addis Ababa.

Micro-finance in Ethiopia
In Ethiopia there were 36 micro-finance institutions (MFIs) which mobilized Birr 28.4 billion in saving deposit and having outstanding credit to the tune of Birr 37.03 billion.

Their deposits saw 40.2% annual increase while their credit expanded 38.5 percent. Their total asset also grew by 43.7 percent to reach Birr 56.3 billion at the end of December, 2017. The MFIs had a total of 1,755 branches and sub branches, according to Second Quarter NBE bulletin 2017/18.