APA-Addis Ababa (Ethiopia) The newly formed Ethiopian Capital Market Authority, which is responsible for regulating financial services, said it will issue licenses to foreign banks in the coming months.
The head of the authority Biruk Taye on Monday said the authority had received instruction from the Ministry of Justice to begin issuing licences to foreign banks. He said it is a significant move for the country’s financial sector.
Last month, Governor of the National Bank of Ethiopia Mamo Meheretu told the parliament that the bank is fast-trucking the roll-out of a new legal framework to spur foreign competition in the local banking sector.
Ethiopia has opened its economy to foreign investment, which has allowed companies like Safaricom to enter the domestic market, Taye said.
However, analysts report that the unpredictable regulatory environment, security breaches, and overall economic instability have hindered operations of these companies.
The report noted that investment banks are currently non-existent in Ethiopia and further mentioned the difficulty in obtaining loans due to high collateral requirements by existing commercial banks. Taye stated that the demand for financial capital is high in Ethiopia.
The report highlighted that Ethiopia is experiencing a significant foreign currency shortage. Last month, it missed a $1 billion bond payment, resulting in a $33 million default.
MG/abj/APA