Ethiopia has embarked on a major reform to liberalise its banking sector, opening the door for Kenyan banks and financial institutions such as KCB Group to set up operations in the populous nation.
Ethiopia constituted a committee to amend Ethiopia’s half-a-century old monetary code; local reports said meaning the long-awaited easing of limitations on foreign banks making investments in Ethiopia has inched closer.
The new code regulating the country’s banking sector will allow the opening up of the financial sector. The head of the committee says the first draft of the financial services code must be ready by December 2022.
Led by Alemante Agidew, Legal and Justice Service Division State Minister at the Ethiopian Ministry of Justice, the committee convened at Hyatt Regency Hotel on March 17, 2022, in Addis.
“The new code is necessitated to cope with the new direction the economy is going in. This includes a capital market and opening up of the economy for foreign players,” Alemante said.
The new Financial Service Code will determine engagement modalities of foreign banks in Ethiopia’s financial industry.
The latest development looks promising for Kenyan banks such as Equity Group and KCB Group which have expressed ambitions to run fully-fledged operations in the neighbouring country.
Ethiopia currently has 18 commercial lenders, two of which are state-owned, according to the central bank.
Kenyan banks have had their sights on the Ethiopian market for years due to the country’s huge population.
With a population of 110 million people, Ethiopia offers significant business opportunities. It is the second-largest in Africa after Nigeria.
Seventeen out of twenty Ethiopians have no access to bank accounts, highlighting the opportunity for foreign lenders.
KCB opened a representative office in Addis Ababa in 2015 to have it ready in the market when the opportunity to run fully-fledged banking operations arises.
This followed the 2012 deal that allowed Kenyan banks to open representative offices but barred full banking operations in Ethiopia including direct lending and deposit-taking.