Accordingly, foreign banks can operate in the Ethiopian market by establishing subsidiaries, opening branches or representative offices, or acquiring shares in existing local banks.
The proclamation, however, sets a cap on foreign strategic investors, capping their ownership at 40 percent in any local bank, while allowing an additional 7 percent to 10 percent stake for non-strategic foreign national investors.
The new law also stipulates that the combined shareholding of foreign nationals and foreign-owned Ethiopian organizations in a local bank shall be limited to 49 percent of the bank’s total subscribed shares.
The law also allows foreign banks to employ foreign nationals as senior executives but requires that resident Ethiopians be included as members of the board of directors.
The approval by legislators came six months after the Council of Ministers passed a draft banking business proclamation, which was subsequently forwarded to the House of Peoples’ Representatives for final endorsement.
In June 2023, the government of Ethiopia announced its intention to issue up to five banking licenses to foreign investors over a five-year period as part of a strategy to open the financial services sector to foreign competitors.
The opening of the banking industry marks a significant shift following decades of dominance by local financial institutions in Ethiopia’s banking sector.
MG/abj/APA