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Ethiopia has announced an economic liberalization move, allowing foreign banks to establish local subsidiaries and permitting foreigners to acquire shares in domestic lenders.
This decision, part of a broader government plan to liberalize the economy, was approved by the cabinet last week.
Ethiopia, with a population exceeding 100 million, is one of the largest economies in Sub-Saharan Africa and has been a long-sought market for foreign investors after being closed off for decades, Reuters reported.
This year, the International Monetary Fund even projects that Ethiopia’s economy will overtake Kenya, and Nigeria as the second-largest economy in Sub-Saharan Africa.
Authorities are also opening up Ethiopia to foreign investment across various sectors, including 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.
The draft law, which must be passed by lawmakers, stipulates that foreign bank subsidiaries must include local resident non-shareholder Ethiopians on their boards of directors.
The bill states that the aggregate shareholding by foreign nationals and foreign-owned Ethiopian organisations in a bank will be limited to 40 percent of the total shares.
Direct shareholding by strategic investors will be capped at a 30 percent 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,” the central bank said in a statement. – Business Insider Africa
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