- Kenyan lender plans entry into Ethiopia after reforms open sector to foreign banks
- Move shows growing competition among regional lenders to tap Ethiopia’s market
ADDIS ABABA, ETHIOPIA – Equity Bank has announced plans to expand into Ethiopia, joining a wave of regional lenders eager to enter Africa’s second-most populous country after reforms opened its banking sector to foreign players.
Chief Executive James Mwangi met last week with Ethiopian Investment Commissioner Zeleke Temesgen to discuss investment conditions. Mwangi said the policy shift allowing foreign banks to apply for licences from June 2025 “created a favourable opportunity” for the Nairobi-based lender.
“Equity has always seen Ethiopia as a strategic destination,” Mwangi said. “We want to serve as a model for other foreign institutions looking to operate here.”
Reform reshaping Ethiopia’s banking sector
Ethiopia’s financial sector has long been shielded from foreign competition, with ownership capped at 49% and multinational banks effectively excluded. The new framework allows foreign lenders to operate through wholly owned subsidiaries or joint ventures with local banks – a change analysts say could transform the industry.
Commissioner Zeleke welcomed Equity’s move, describing it as “an experienced and trusted institution” and pledging support for its investment. “Ethiopia remains a preferred country for companies wishing to engage in the financial sector,” he said.
Equity Bank, one of East Africa’s largest lenders, already operates in Kenya, the Democratic Republic of Congo, Rwanda, Uganda, South Sudan, and Tanzania.
Competition among Kenyan lenders
The announcement comes as rival Kenyan banks intensify efforts to enter Ethiopia. On August 21, Kenya Commercial Bank (KCB) confirmed talks with Ethiopia’s central bank about acquiring a stake in a local lender. KCB, which reported an 8% rise in first-half net profit to USD 250 million, is exploring exemptions to foreign ownership rules as part of its entry strategy.
Experts say foreign entrants could provide a much-needed boost to Ethiopia’s shallow financial system. Dakito Alemu, Associate Professor of Accounting and Finance, said, “The initial investment required for these banks will increase the availability of foreign exchange.”
But he warned of long-term risks. “Profits may eventually be repatriated to their home countries, which could undermine reserves. Strong oversight from the National Bank of Ethiopia is essential.”
With more banks expected to follow Equity and KCB, Ethiopia is entering a new phase of financial transformation that could bring greater competition, deeper capital markets and pave the way for the planned Ethiopian Securities Exchange.
