Ethiopia Draws First Foreign Bank Applications After Ending Decades-Long Ban

Two foreign banking institutions have applied to establish operations in Ethiopia, becoming the first international banks to formally seek entry since the country ended a decades-long ban on foreign participation in its banking sector.

The applications are being reviewed by the National Bank of Ethiopia, according to Frezer Ayalew, Director of the Supervision Directorate at the central bank.

"Currently, there are two foreign bank applicants whose applications are being processed by the central bank," Frezer said at the 2nd Ethiopia Finance Forum 2026 took place from September 29 to October 1, 2026, held under the theme "Partnering for Growth: The Enabling Environment for Foreign Strategic Investors in Ethiopia’s Financial Sector and Host Country Expectations."

Both applicants have chosen the greenfield route, meaning they intend to establish new banking operations in Ethiopia rather than acquire shares in existing local banks.

The applications follow a major shift in Ethiopia’s banking policy. Parliament ratified the Banking Business Proclamation No. 1360/2024 in December 2024, ending the long-standing restriction on foreign participation. The law took effect in March 2025.

Under the new framework, foreign banks can establish wholly or partly owned subsidiaries, open branches or acquire stakes in existing Ethiopian banks. They can also establish representative offices for liaison, marketing and market research, although such offices cannot conduct banking transactions.

Ethiopia’s commercial banking sector had been closed to foreign institutions since 1975, when the Derg military government nationalised the country’s banks. Private domestic banks were permitted from 1994 following the fall of the Derg, but foreign banks remained excluded from the market.

The NBE has said it wants foreign investors that can provide long-term capital and technical expertise as Ethiopia integrates its financial system with international markets.

Frezer said foreign institutions were still conducting market research, risk assessments and internal due diligence before establishing operations in the country.

"When a foreign bank tries to go international and invest in foreign jurisdictions, they must do their homework," he said. "They are doing the necessary market research, due diligence and so on. That movement is currently underway."

The central bank studied financial markets including China, India and Vietnam while developing the framework for foreign participation, with the aim of adapting international experience to Ethiopia’s financial system and maintaining financial stability.

The NBE has said opening the sector to foreign investment is intended to accelerate the transformation of Ethiopia’s financial system and strengthen its contribution to economic development.

Source: FSX Business News