Includes special features of this country’s banking system and rules/laws that might impact U.S. business.
Last Published: 6/21/2017

The GOE allowed the establishment of private banks and insurance companies in 1994, but continues to prohibit foreign ownership in this sector.  The Ethiopian banking sector is currently comprised of a central bank (The National Bank of Ethiopia or NBE), two government owned banks and sixteen private banks. In September 2011, NBE issued a regulation that increased the minimum paid up capital required to establish a new bank from 75 million Birr ($3.4 million) to 500 million Birr ($22 million), which effectively stopped the entry of most new banks to the market. Under the Growth and Transformation Plan II (GTP II) period, NBE further increased the minimum paid up capital for banks to 2 Billion Birr ($90 million) and advised all the sixteen currently operating private banks to increase their paid up capital to that amount by 2020. Foreign banks are not permitted to provide financial services in Ethiopia and the market is closed to foreign retail banks. Currently, Ethiopia has allowed some foreign banks to open liaison offices in Addis, to facilitate credit to companies from their countries of origins.  Chinese, German, Kenyan, Turkish, and South African banks have opened liaison offices in Ethiopia.

Based on the most recently data, Commercial Bank of Ethiopia (CBE) mobilizes more than 60 percent of total bank deposits, bank loans and foreign exchange.  NBE controls the bank’s minimum deposit rate, which now stands at 5 percent, while loan interest rates are allowed to float.  Real deposit interest rates have been negative in recent years mainly due to inflation.

The state-owned Commercial Bank of Ethiopia (CBE) dominates the market in terms of assets, deposits, bank branches, and total banking workforce.   In 2016, CBE merged with another state owned bank, the Construction and Business Bank. The other government-owned specialized bank is the Development Bank of Ethiopia (DBE).  The state-owned DBE provides loans to investors in priority sectors. DBE extends short, medium, and long-term loans for viable development projects, including industrial and agricultural projects.  DBE also provides other banking services such as checking and saving accounts to its clients. 
NBE aims to foster monetary stability and a sound financial system, maintaining credit and exchange conditions conducive to the balanced growth of the economy. 

NBE may engage with banks and other financial institutions in the discount, rediscount, purchase, or sale of duly signed and endorsed bills of exchange, promissory notes, acceptances, and other credit instruments with maturity periods not exceeding 180 days from the date of their discount, rediscount, or acquisition by the bank.  The bank may buy, sell, and hold foreign currency notes and coins and such documents and instruments, including telegraphic transfers, as they are customarily employed in international payments or transfers of funds.  Lack of access to finance is a significant constraint for local businesses.  A January 2011 NBE’s  directive forces banks to purchase central bank bills to the tune of 27% of their loans and advances at an interest of 3% (lower than the cost of funds at 5%) and a maturity of five years.  This action constrains banks' liquidity and capacity to supply businesses with needed finance.  There is a growing liquidity problem in Ethiopia that is impeding the private sector. To address these problems, NBE reduced reserve and liquidity requirements of banks from 15% and 25% to 10% and 20%, respectively in January 2012 and further reduced the reserve requirement to 5% in March 2013.  In 2015, NBE allowed commercial banks to provide mobile banking service and agent banking. Pursuant to NBE’s permit, many of the commercial banks added mobile and agent banking in their line of services.


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Ethiopia Market Access Banks