Ethiopia Allows Foreign Investment in Banking Sector

Ethiopia has ratified a landmark banking business proclamation, marking the first time in fifty years that foreign banks are allowed to invest in the country, with only three MPs opposing the vote. The new legislation permits foreign banks to establish subsidiaries, open branches, or buy stakes in local banks, but caps foreign ownership at 40% for strategic investors and 49% total for foreign entities. This move is part of a broader effort to modernize Ethiopia's financial sector, which currently has a low financial inclusivity rate of around 50%. Central Bank Governor Mamo Mihretu supports the change as a means to enhance regulatory capacity, despite concerns from some lawmakers regarding potential negative impacts on local banks. The reforms also include provisions for a central bank digital currency and improved consumer protection measures, aiming to foster innovation and stability in the financial landscape. Overall, this initiative signals a significant shift towards integrating Ethiopia's banking sector with international standards and attracting foreign investment.