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Ethiopia Intends to Allow Foreign Lenders to Acquire Local Banks

Ethiopia’s Council of Ministers has approved a bill according to which foreign financial institutions are granted the right to acquire stakes in the banks of this African country.

Ethiopia Intends to Allow Foreign Lenders to Acquire Local Banks

The mentioned decision marks the end of a thirty-year policy of excluding foreigners from the Ethiopian banking sector. At the same time, it is worth noting that the ministerial decree still requires the approval of lawmakers.

As for the content of the bill, in this case, foreign financial institutions can buy stakes in existing and new banks in an African country. Foreigners are also allowed to set up subsidiaries, open branches, or establish representative offices. Moreover, the bill aims to introduce rules stipulating that overseas banks in some cases can take over the management of a troubled lender to preserve financial stability.

Ethiopia is the most populous country in Africa after Nigeria. Addis Ababa is currently seeking to raise investments to finance post-war reconstruction. In 2022, the Ethiopian government and Tigrayan dissident fighters signed an agreement to end the two-year armed conflict. The country’s foreign exchange reserves have largely decreased. In December, Ethiopia became the last country on the continent to default.

The bill limits direct shareholding by a strategic foreign investor to 30%. Moreover, the total holdings by non-citizens and foreign-owned companies are limited at the 40% mark. Moreover, it is clarified that investments can only be in foreign currency.

The central bank of Ethiopia will issue a statement on the bill.

As we have reported earlier, Ethiopian Eco Startup Kubik Gets Fresh Funding for Pan-African Growth.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.