African banks eye entry into Ethiopia after sector opens to foreign investors

Ethiopia’s move to open its banking sector to foreign investors has sparked interest from lenders across Africa. The new law, enacted in December, allows international banks to establish subsidiaries and acquire stakes in existing Ethiopian banks.

Kenya Commercial Bank (KCB) has confirmed plans to acquire a stake in an Ethiopian lender. It could also seek an exemption from the country’s foreign ownership cap to move ahead with the deal. Under Ethiopia’s new banking law, foreign investors may collectively hold up to 49% of a local bank, while individual strategic investors such as KCB are limited to 40%. The country’s central bank, however, retains discretion to grant higher stakes on a case-by-case basis.

Equity Bank, another major Kenyan lender, has also signalled its intention to enter Ethiopia. Its chief executive recently met officials from the Ethiopian Investment Commission to discuss entry conditions. The bank built its success at home by offering low-cost products to previously unbanked Kenyans and expanding into remote areas through an agency banking model. With nearly 80% of Ethiopians living in rural areas, the bank’s approach could be well suited to the market.

South African banks, too, are positioning themselves for a possible entry. Standard Bank, Africa’s largest bank by assets, has operated a representative office in Addis Ababa since 2015. However, these offices are limited in scope and cannot engage in direct banking activities such as taking deposits or issuing loans. Absa Group has also publicly expressed interest in the country, while Capitec Bank, South Africa’s largest by customer numbers, has described Ethiopia as “a fantastic market with scalable opportunities” as it considers gradual expansion across the continent.

In addition, First Bank of Nigeria, Morocco’s Attijariwafa Bank and Commercial International Bank of Egypt, which opened a representative office in 2019, are among those assessing opportunities in the Horn of Africa country.

Ethiopia, a nation of 135m people, has over two dozen banks, with the state-owned Commercial Bank of Ethiopia dominating the market and holding about half of total assets.

Ethiopia’s vast rural population remains one of the country’s most underserved market segments. Only 10% of rural women and 26% of rural men have access to formal financial accounts.

There are also growing opportunities to provide financing to businesses. Ethiopia’s exports reached US$8.3bn in the 2025 financial year, double the previous year’s figure, driving demand for trade finance and working capital. The need is particularly acute among micro, small and medium-sized enterprises, of which 84% lack access to formal credit – a gap estimated at US$4.2bn.

Agriculture offers another large, untapped opportunity. The sector contributes 32% of GDP, yet current agricultural financing totals only US$825m, compared with an estimated demand of US$17bn. New entrants could help close this gap by funding inputs for crops and livestock, irrigation systems, farm equipment and mechanisation, as well as supporting aggregation and marketing of agricultural produce.

 

References

'CIB establishes its commercial representative office in Ethiopia', CIB Egypt, 18 April 2019

'South African bank Absa joins list of Ethiopia's suitors', Africanews, 13 August 2024

'Ethiopia opens doors to global banking: Kenya, Morocco, and UAE lead the charge', Addis Insight, 04 November 2024

'Investing in Ethiopia's banking sector: The final frontier for banking in Africa', Ethiopia Finance Forum 2025, May 2025

'Africa’s other giant awakens: Lessons from Ethiopia’s digital financial revolution', Accion, 08 July 2025

'Ethiopia opens to foreign banks', African Capital Markets News, 09 July 2025

'Kenya’s KCB eyes exemption from Ethiopia’s foreign ownership cap', The Africa Report, 18 August 2025

'Facebook post', Ethiopian Business Review, 01 September 2025

'LinkedIn post', Ethiopian Investment Commission (EIC), September 2025

'Kenyan banks want to enter Ethiopia despite the risks', Semafor Africa, 13 October 2025

'Ethiopia population (LIVE)', Worldometer, Accessed on 28 October 2025