Ethiopia has officially opened its banking sector to foreign investors, a long-awaited move that could reshape the country's financial landscape. The National Bank of Ethiopia (NBE) announced on June 25 that international banks and investors can now apply for banking licenses.

Under new regulations passed in December 2024, foreign players are allowed to set up subsidiaries, branches, or representative offices in the country. They can also buy stakes in local banks—though foreign ownership is capped at 49%, with the majority 51% reserved for Ethiopian nationals to safeguard national interests.

This opening is part of a broader wave of liberal reforms led by Prime Minister Abiy Ahmed since 2018. These reforms include the introduction of a stock exchange, a more flexible exchange rate system, and liberalization of sectors like telecoms.

The Ethiopian central bank expects the move to attract more capital, boost service quality, and make the sector more efficient and inclusive. Ethiopia’s banking industry currently includes 32 institutions, led by the state-owned Commercial Bank of Ethiopia, which holds about 22% of the market.

Several major African banks, such as Egypt’s Commercial International Bank, Kenya’s KCB Group, and South Africa’s Standard Bank, have been eagerly awaiting this opportunity to enter the Ethiopian market—Africa’s second most populous country with 120 million people.