Foreign banks seeking to enter Ethiopia could be required to have a local partner to set up business in the country whose unbanked population stands at 75 percent. The opening up might only be limited to regional banks in a joint venture basis with local banks. That will be easily manageable for the central bank. The first target is to boost the foreign currency inflow. There are many legal framework revisions underway, and many are in a draft stage. Ethiopia this year constituted a committee to liberalize the banking sector, taking a major step in opening the door for Kenyan lenders to set up operations in the populous nation.
The opening up will be done in a win-win situation, without affecting local banks. Opening will highly benefit the economy, local banks, and other businesses. The new Financial Service Code will determine engagement modalities of foreign banks in Ethiopia’s financial industry. Kenyan banks led by KCB and Equity Group initially preferred starting operations from scratch in the regional markets but have since taken to making acquisitions, spending billions of shillings on the expansion and diversification plan. Ethiopia’s population of 110 million people –the second largest in Africa after Nigeria— offers significant business opportunities. Less than 15 percent of Ethiopians have access to a bank account, highlighting the opportunity for foreign lenders.