The Council of Ministers of Ethiopia over the weekend approved the long awaited bill that allows foreign banks to operate in the country.
The opening of the banking sector for foreign investors will strengthen the linkage of Ethiopia’s economy with the rest of the world, as well as bring new technologies and know-how to the domestic banking industry.
Allowing foreign investors in the local banking sector is also expected to improve the forex shortage in Ethiopia, and access to finance, according to the justification indicated in the document.
Like other policies, once the decision is approved by the Ethiopian Parliament and issued in the Negarit gazette, foreign banks are expected to enter the market of over 110 million plus population.
In Ethiopia the finance sector that includes banking, insurance, and microfinance, has been among the protected strategic areas closed for foreign companies.
For the past decades, many countries including the United States and Europeans have been waiting for the government of Ethiopia to liberalize the financial sector and let their banks operate in Ethiopia.
So far, the banking sector is one of the lucrative industries with return on investment of between 20 to 50 percent.
Currently there are about dozens of private banks in Ethiopia, while the state-owned Commercial bank of Ethiopia has close to half the market share in the industry.
It is recalled that about a week ago, the first private foreign telecom operator Safaricom started operation in Ethiopia following the Ethiopian Government’s decision to open the telecom sector for foreign operators.
MG/as/APA