By Enyichukwu Enemanna
As part of the government’s broader plan to liberalise the economy, Ethiopia’s cabinet on Friday passed a bill allowing foreign banks to set up local subsidiaries and branches as well as allowing foreigners to acquire shares in domestic lenders.
The over 100 million population is one of the biggest economies in Sub-Saharan Africa and has market that has attracted attention of foreign investors after it was closed off for decades.
The country says it is opening its economy for foreign investment in sectors such as banking, telecoms, transportation and aviation.
“A foreign bank which is well established, reputable and financially sound may be allowed to establish (a) partially or fully owned foreign bank subsidiary, or open a foreign bank branch, or a representative office, or acquire shares of a bank,” the bill states.
Foreign bank subsidiaries in Ethiopia must however include local resident non-shareholder on the board of directors.
According to the bill, the aggregate shareholding by foreign nationals and foreign-owned Ethiopian organizations in a bank will be limited to a 40% of total shares.
Also, direct shareholding by strategic investors will be limited to a 30% stake.
“These legislations represent a significant step in laying a strong foundation for growth and enhancing the credibility, accountability, transparency and governance of the National Bank of Ethiopia,” central bank said in a statement.
Heritage Times HT reports that Ethiopia’s banking industry is dominated by state-owned Commercial Bank of Ethiopia, and the sector has 29 players, all of them locally owned.
In May last year the central bank announced it would offer five banking licences to foreign investors within five years.
