Ethiopia passes law to open banking to foreign competition

As reported by Reuters

Summary

• Ethiopia's parliament passed landmark banking legislation that fundamentally opens the country's banking sector to foreign competition for the first time in decades.
• The new law allows foreign banks to enter the Ethiopian market through three main channels: establishing wholly-owned subsidiaries, opening branches of their existing operations, or acquiring stakes of up to 40% in existing local banks.
• This represents a significant shift from the previous policy, which largely restricted the banking sector to domestic ownership and limited foreign participation.
• The legislation is part of Prime Minister Abiy Ahmed's broader economic liberalization agenda, which has included reforms to the telecom sector, the exchange rate regime, and now the financial sector.
• Analysts expect the reforms to bring in capital, expertise, and competition that could improve banking services and efficiency across the economy.
• BirrValue review: Foreign bank entry may eventually improve FX services and competition. For now, compare rates at CBE, Awash, Dashen, and other local banks on BirrValue—reforms take time to materialize.