Ethiopia’s central bank has issued a long-awaited directive allowing foreign banks and investors to formally enter its financial sector, marking a major step in the country’s broader economic liberalisation programme. The move comes after years of reform commitments and follows the December 2024 ratification of a new banking law by parliament.
It is the first time Ethiopia is opening its banking system to foreign financial institutions since the sector was nationalised under the Derg regime in 1974. Despite being home to over 128 million people and the largest economy in East Africa by GDP, Ethiopia has long maintained a closed banking sector. Analysts say the move could inject new capital, boost competition, and accelerate the development of a sector that remains heavily dominated by the state-owned Commercial Bank of Ethiopia.
The new licencing rules were published by the National Bank of Ethiopia (NBE) on Wednesday, June 25. They now provide a clear regulatory path for foreign banks to set up subsidiaries, open branches, or establish representative offices in the country. Foreign strategic investors can also acquire stakes in existing local banks, with individual ownership capped at 30%, and total foreign ownership capped at 40%.
The NBE framed the new rules as part of a deliberate reform sequence designed to deepen financial access and attract global players to a market with strong growth potential.
“The Ethiopian banking sector is hereby open for foreign participation and applications by foreign banks and investors can be submitted to NBE from today onwards,” the central bank said in the directive.
The licencing directive also introduces a shift in how representative offices are regulated, placing their licencing and supervision under the NBE for the first time.
The development follows months of signalling by top officials, including central bank governor Mamo Mihretu, who in recent weeks said foreign banks could begin operations in the country before the end of 2025.
Foreign banks such as Kenya’s KCB Group and South Africa’s Standard Bank have previously expressed interest in entering Ethiopia once the regulatory environment allows. The NBE has said it will admit a limited number of foreign players, up to five licences over the next five years. The move is expected to complement Ethiopia’s wider reform push, which includes ongoing debt restructuring talks and a $3.4 billion agreement with the IMF.
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