Ethiopia Opens Financial Sector to Foreign Banks

Ethiopia has officially opened its banking sector to foreign participation with the issuance of Directive SBB/94/2025 by the National Bank of Ethiopia (NBE), allowing international banks and investors to apply for licenses immediately. This directive provides three entry routes for foreign banks: establishing wholly owned subsidiaries, opening branches, or setting up representative offices, each with distinct regulatory requirements including data localization and capital standards. Ownership of local banks by foreign strategic investors is capped at 40%, and the sector's liberalization is part of a broader reform agenda that includes currency flotation and debt restructuring under an IMF program. The move marks a historic shift for Ethiopia's previously closed banking market and aims to attract international firms, increase capital inflows, foster technical innovation, and enhance financial inclusion in a country where formal banking penetration remains low. The NBE anticipates that foreign entry will deepen the financial sector, improve competition, and contribute to national economic growth. This liberalization follows prior reforms such as opening the telecoms sector to foreign investors and signals Ethiopia's intent to integrate more fully into the global financial system.