Ethiopia has officially allowed foreign banks to operate in its Special Economic Zones, introducing a strict regulatory framework designed to balance financial sector openness with systemic stability.

The National Bank of Ethiopia (NBE) issued Directive No. SBB/99/2026, formally defining foreign-owned subsidiaries and branches as eligible to enter SEZs. To qualify, institutions must be incorporated under Ethiopian law and maintain their head offices within the country.

While the move signals a deliberate effort to attract international capital and support export-driven growth, access comes with rigorous conditions. Applicants are generally required to hold at least one percent of total banking sector assets, although new foreign subsidiaries and branches receive a two-year grace period before this threshold applies.

The NBE has also raised prudential standards for all SEZ banks. Branches must maintain capital adequacy ratios two percentage points above the minimum for four consecutive quarters, adhere to strict non-performing loan limits for at least one year, and demonstrate a clean three-month liquidity record. Compliance with foreign exchange obligations is mandatory, reflecting the zones’ role in facilitating international trade.

Operational rules impose a closed-loop service model, restricting SEZ branches to zone residents and firms, while requiring them to offer foreign exchange services. Existing banks within newly designated SEZs have two years to align with these standards, after which non-compliant branches may be ordered to relocate or close.