Ethiopia plans to allow foreign banks acquire local lenders
Ethiopia plans to allow overseas lenders to acquire up to 30% in its commercial banks, the latest step by the government to encourage investment in one of Africa’s biggest economies.
A draft by Ethiopia’s Council of Ministers circulated to domestic lenders on Oct. 5 and seen by Bloomberg stipulates the amount of equity that foreigners can purchase. It comes after the government last month announced plans to ease restrictions on bank ownership, and fulfills a pledge by Prime Minister Abiy Ahmed when he came to power in 2018 to open up the economy to foreign investors.
National Bank of Ethiopia Governor Yinager Dessie didn’t answer calls or respond to text messages seeking comment. The central bank Vice Governor Fikadu Digafe said last month he expects the draft legislation to be enacted this year.
Ethiopia needs overseas investment to accelerate growth that’s been crimped by a civil war in the country’s northern region. The International Monetary Fund forecasts economic expansion will slow to 3.8% this year. The nation is also facing a severe shortage of foreign currency and consumer prices are soaring.
Ethiopia has 25 commercial banks serving 117 million people, according to World Bank data. Commercial Bank of Ethiopia, one of two state-owned lenders, held assets worth 485.7 billion birr ($17.6 billion) and caters to 15.9 million customers, according to its website.
Several foreign banks have representative offices in the Horn of Africa country, including Equity Group Holdings and KCB Group — the two biggest lenders in neighboring Kenya — along with Standard Bank Group. Lease companies, such as a unit of New York-based Africa Asset Finance Co., which pledged to bring in equipment worth $600 million after being licensed in August, can also operate there.
The draft legislation also proposes that foreigner individuals can buy 5% in domestic banks. Foreign banks will also be allowed to set up subsidiaries or open branches in the nation.
Africa’s second-biggest nation by population has already opened up its telecommunication industry by awarding a license to a Safaricom Plc-led Global Partnership for Ethiopia, a consortium that includes Japan’s Sumitomo Corp. and Britain’s Vodafone Group. The Ethiopian unit has secured a mobile money-services license after beginning commercial operations there and expects about $1 billion of investments within the next three years.
A year of its launch, the state telecom’s mobile money platform added 21.8 million users as of July 7.
