Ethiopia opens banking to foreign lenders after 50 years. KCB, Equity, and Standard Bank race for entry as reforms speed up under new central bank governor.
Ethiopia is fast becoming Africa’s hottest financial frontier. Less than a year after lawmakers scrapped a half-century ban on foreign lenders, some of the continent’s biggest banks are preparing to enter one of its largest but least-served economies.
In December 2024, parliament passed the Banking Business Proclamation No. 1360. The law reopened the sector to foreign players for the first time since the 1970s. In June 2025, the National Bank of Ethiopia (NBE) issued Directive SBB/94/2025. The directive allows international lenders to apply for licenses or buy stakes in local banks.
Foreign strategic investors can own up to 40% of a bank. Total foreign ownership is capped at 49%. New entrants also face a $34.4 million minimum capital requirement, payable in foreign currency.
Kenyan Banks Move First
Kenya’s two largest lenders — KCB Group Plc and Equity Group Holdings Plc — which recorded the continent’s fastest growth, rising by 25.1% to $1.18 billion in 2025, according to the latest Brand Finance African Banking report,are leading the charge. In August 2025, Nairobi-based KCB confirmed talks to buy a local Ethiopian bank. With assets of KSh2 trillion ($15.5 billion) and a half-year net profit of KSh32.3 billion ($250 million), the lender is expanding from a position of strength.
“Ethiopia is a natural extension of our footprint,” KCB CEO Paul Russo said at an investor briefing this month. “The demographics and pace of reforms make it the most exciting banking opportunity in Africa.”
Rival Equity Group is also sharpening its plans. CEO James Mwangi met with Ethiopian Investment Commission head Zeleke Temesgen in September. Equity already operates in six African markets and reported a 16.9% rise in first-half profit to KSh34.6 billion ($268 million).
“We see Ethiopia as the next frontier,” Mwangi said after the meeting. “It is a market we cannot afford to miss.”
Wider Regional Interest
Djibouti’s Banque pour le Commerce et l’Industrie Mer Rouge (BCIMR) has also expressed interest. South Africa’s Standard Bank Group Ltd. is monitoring developments but wants greater policy certainty.
“There’s appetite, no doubt,” said Patrick Mweheire, Standard Bank’s East Africa CEO. “But investors want clarity about the rules before committing balance sheets.”
The reforms extend beyond banking. In March 2025, Ethiopia issued its first investment banking licenses. It also launched a domestic stock exchange, floated the birr to unify exchange rates, and introduced a central bank policy rate.
Market Potential
Ethiopia has more than 130 million people, making it Africa’s second most populous nation. Yet just 46% of adults held a bank or mobile money account in 2022, according to World Bank data. That compares with 80% in Kenya, 77% in Rwanda, and 66% in Uganda.
The government wants banking access to reach 70% by the end of 2025. That goal, combined with a fast-growing economy, is drawing lenders. The International Monetary Fund (IMF) projects growth averaging 7.4% a year from 2025 to 2030. In July, the IMF’s executive board unlocked $262 million after completing a program review, easing investor concerns.
Risks Remain
The sector still faces risks. Ethiopia has 32 banks, most of them small. The state-owned Commercial Bank of Ethiopia controls 22% of the market. By comparison, leading private banks such as Awash and Dashen each hold assets of about 350 billion birr ($2.4 billion).
“Ethiopian banks are much smaller than their regional peers,” said Mered Fikireyohannes, CEO of Pragma Capital in Addis Ababa. “They must either consolidate, partner with foreigners, or risk being crowded out.”
Macroeconomic strains add pressure. Annual inflation is above 20%, and foreign exchange reserves dropped from $3.6 billion in Q3 2024 to $3.4 billion in Q1 2025. Ethiopia reached a debt relief deal “in principle” under the G20 Common Framework in March, but a final memorandum has yet to be signed.
New Leadership
On Sept. 19, 2025, Prime Minister Abiy Ahmed appointed Eyob Tekalign Tolina as governor of the NBE. He replaced reformer Mamo Mihretu, who resigned earlier in the month.
Eyob, a former deputy finance minister, helped design Ethiopia’s financial liberalization program. Investors see him as a stabilizing choice. “For investment, his appointment will lure foreign investors because of the trust he has gained during talks with Bretton Woods institutions,” said a senior Ethiopian banker.
What’s Next
The first licenses for foreign banks are expected in 2026. The speed of approvals will depend on how fast Eyob addresses inflation, stabilizes the birr, and ensures regulatory clarity.
For now, lenders from Nairobi to Johannesburg are preparing their bids. As KCB’s Russo put it: “Opportunities like Ethiopia don’t come often — and they don’t wait forever.”
