Economists Express Confidence on Foreign Banks Operating in Ethiopia Would Boost Int’l Competitiveness

Addis Ababa December 21/2024 (ENA)—Experts have expressed confidence that allowing foreign banks to enter Ethiopia's financial sector can significantly enhance international competitiveness and facilitate technology transfer in the sphere.

As Ethiopia embarked on far-reaching economic reforms, various success stories have been recorded, particularly in the banking sector.

For years, the country’s banking industry has been closed to foreign investors, but it is now gradually opening up as a key indicator of these reforms.

On Wednesday, the House Peoples Representatives (HPR) approved a new and historic banking proclamation that allows foreign banks entry into Ethiopia’s banking industry as the financial sector is part of the nation’s comprehensive reform.

Approached by ENA, Arega Shumete, an economist, pointed out that the restriction of foreign investment in several sectors, including banking, has hindered the country's economic growth.

He emphasized that the opening of various trade and investment opportunities to private and foreign investors is a positive outcome of the ongoing national reform.

Arega believes that the gradual opening of the banking sector to foreign investors will not only make it internationally competitive but will also allow the sector to grow beyond Ethiopia’s borders.

In this regard, the approved National Bank of Ethiopia Reform Bill by the parliament would pave the way for foreign investors to enter the banking sector.

Arega stated that this development will revitalize the sector, making it internationally competitive and promoting knowledge and technology transfer.

He further highlighted that Ethiopia’s efforts to join the World Trade Organization (WTO) would also benefit from foreign investment in the banking sector.

Director of the African Economic Research Consortium, Professor Abi Kedir shared similar views, stressing that foreign banks would foster better competition and lead to improved outcomes among local banks.

He explained that the capacity and expertise brought by international banks would help local banks improve and offer better services.

Professor Kedir also pointed out that the entry of foreign banks would create opportunities in other sectors, particularly for agriculture and manufacturing, by improving credit provision.

He also advised local banks to modernize their operations in order to remain competitive, suggesting that they strengthen their capacities through mergers and increased investment in human resources, technology, and capital.

Emphasizing the importance of opening the financial sector to foreign investment, the director called for the creation of favorable conditions that will attract foreign investors to Ethiopia.