The decision is a major part of the country’s plan to liberalize its financial institution, and represents a historic break from the formerly shut banking sector.
The statement was made by the National Bank of Ethiopia (NBE) on Tuesday when they released Directive SBB/94/2025.
Following the enactment of the initiative, the directive establishes a thorough regulatory framework for foreign participation in the banking industry.
Foreign financial instituitions and financial investors can now apply for banking licenses with immediate effect, which opens the door to cooperation with local institutions or direct market entrance, as reported by AddisnInsight.
Industry experts deduced that the banking sector’s deregulation may attract international firms such as Standard Chartered, Ecobank, or Gulf banks, who may decide to participate through joint ventures or totally owned subsidiaries.
In a sector where formal banking penetration is still around 40% in a population of over 120 million, it also lays the groundwork for increasing capital inflows, promoting technical innovation, and providing increased efficiency.
While the precise dates for license approvals have not yet been disclosed, the new directive’s regulatory clarity along with strong political commitment could lead to international interest and change Ethiopia’s banking environment.
Ethiopia announced a step toward economic liberalization in June 2024 that would let foreigners purchase shares in domestic institutions and allow international banks to set up local subsidiaries.
The cabinet accepted this move as part of a larger government initiative to liberalize the economy.
Ethiopia’s recent plans in its banking sector
With significant ramifications for investment, financial inclusion, and economic growth, Ethiopia’s acceptance of this pivotal moment is a definite indication that the continent’s second-most populous nation is prepared to become more completely integrated into the global financial system.
In February, 2025, Genet Teshome Jirru, Ethiopia’s ambassador to Russia, during an interview, disclosed that his country and Russia are trending toward doing business in their currencies.
During the interview, he pointed out the numerous advantages to be had including cutting transaction costs and economic uncertainty, if the idea makes headway.
Additionally, Ethiopia inked a $3.4 billion four-year reform agreement with the International Monetary Fund (IMF) in July 2024.
The reform package includes sweeping changes such as the flotation of the Ethiopian birr, which as of now, the country has already implemented, and the ongoing $8.4 billion debt restructuring with official creditors, steps intended to stabilize the economy and build investor confidence.
