The National Bank of Ethiopia has unveiled the capital requirements and regulations that will govern foreign bank ownership in the 120 million-person market.
According to local reports, the directive is laid under a circular titled ‘Requirements for Licensing and Renewal of Banking Business and Representative Office Directive No. SBB/XX/2025′ which replaces the 2013 directives.
With the directive, Ethiopia, which in 2024 legalized the ability for foreign banks to operate in the country, is laying the groundwork for opening Ethiopia’s banking sector to foreign banks albeit under tightly controlled and highly regulated conditions.
“This isn’t just about opening the doors to foreign banks,” said a senior official from NBE.
“It’s about opening the right doors, with the right locks, and only for those who come with the right credentials.”
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The directive outlines three pathways for foreign participation in Ethiopia’s banking sector. Foreign bank subsidiaries are fully independent entities incorporated under Ethiopian law and subject to local regulations.
Foreign bank branches function as extensions of international banks, operating under their parent institution’s license without separate legal identity. Representative offices serve as non-transactional liaison offices, focusing solely on market research, promotional activities, and business networking:
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Foreign Bank Subsidiary – Requires ETB 5 billion (approximately $90 million) in fully paid-up capital upfront, with a registration fee of Birr 600,000 ($4,579). It must be incorporated under Ethiopian law, and at least one-third of its board members must be Ethiopian nationals.
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Foreign Bank Branch – Must remit ETB 5 billion in foreign currency, with a registration fee of Birr 600,000. It operates under the license of its parent bank and must choose between deposit-taking or non-deposit-taking activities.
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Representative Office – Needs a minimum annual expenditure of $100,000 and a registration fee of Birr 150,000 ($1,140). Its role is strictly limited to market research, liaison, and promotional activities, with no banking transactions permitted.
To prevent market dominance, ownership limits are set as follows:
- Strategic investors can hold a maximum of 40%, while
- Total foreign shareholding in a bank is capped at 49%.
- Individual investors are limited to 7%, and
- Institutions may own up to 10%, unless they meet specific qualification criteria.
Foreign banks are required to store and process customer data within Ethiopia. Any transfer of non-customer data must be encrypted, disclosed, and approved by the National Bank of Ethiopia (NBE).
Ethiopia’s banking industry is dominated by the state-owned Commercial Bank of Ethiopia, with a total of 32 locally-owned banks in the sector.
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