Ethiopia Will Allow Foreign Banks with Limited Licenses as Initial Step, Says Central Bank

Addis Ababa, (ENA) November 12,2022 Allowing foreign banks in Ethiopia in a gradual process will give the sector an opportunity to take the right experience that can fit into the country as the number of licenses will be limited as an initial step, according to National Bank of Ethiopia (NBE).

NBE Financial Institutions Supervision Deputy Governor, Solomon Desta noted that allowing foreign banks will bring plenty of benefits for Ethiopia in general and the banking sector in particular.

Pertinent mechanisms will, however, be implemented to cope with all the challenges, and the plan is to capitalize the positives that the foreign banks will bring to the industry and reduce challenges as well, the deputy governor added.

“There are safeguards to avoid foreign-induced crisis in the sector. We will limit the number of foreign banks entering into the country as an initial step. This gives us the chance to learn and gain enough experience, and time for local banks to raise competitive capacity.”

Stating that the gradual process of allowing foreign banks in the Ethiopian banking industry will give the sector an opportunity to choose and take the right experience that can fit the country, Solomon said that “the number of licenses to be given for foreign banks will be limited with limited branches as an initial step.”

Capitalizing on the good experience and reducing the consequential damages will be our prioritized activities to be undertaken, the the deputy governor underscored.

The other priority is diversifying the activities of the incoming foreign banks just not to concentrate on limited cities, companies, and or individuals, it was learned.

Working on capacity building and monitoring mechanism is pivotal, according to Solomon. “On our side, we will actively work on capacity building, training, introducing technologies, strengthening cyber security, working on financial stability frameworks and strong supervision and monitoring mechanisms.”

It is to be recalled that the Council of Ministers decided last month to open up the banking sector to foreign investors, which was only allowed for local banks.

Commenting on the implementation of the policy, Ethiopian Economic Association CEO Professor Mengistu Ketema said “when we say let us open our banking industry it does not mean 'let it be open in a disordered manner'.”

Working on macro-economic stability, enhancing the capacity of local banks and the supervision and monitoring mechanism of the National Bank need to be prioritized, he stressed.  

The economic researcher, Fetene Bogale, said preparation on well panned supervision mechanism and capacity building in human resource and technology are crucial to cope up with the newly incoming sophisticated technologies with foreign banks.

For him, allowing foreign banks in gradual process will be beneficial for the country and for local banks, enabling them to take lessons and enhancing the competitive capacity of the banks through time.

Countries that have allowed foreign banks with maximum caution and careful preparations have been successful while the rest which have allowed them without sufficient preparation suffered a lot.

Ethiopian News Agency