Ethiopia has officially opened its banking sector to foreign investors with a new directive that came into effect on June 25, 2025, allowing international banks to operate in the country through clearly defined entry paths. The move marks a major shift in Ethiopia’s financial system, which has long remained closed to foreign participation. The country’s central bank, the National Bank of Ethiopia (NBE), introduced a structured approach for foreign banks to enter through wholly owned subsidiaries, branches, or representative offices.
The new regulation lays out detailed guidelines on how international banks can participate in Ethiopia’s growing economy. Banks interested in entering must meet strict requirements, including capital thresholds, licensing fees, and data protection obligations. The regulation also signals the country’s effort to ensure that its banking sector opens up while remaining well-regulated and resilient.
One of the early movers showing interest in the Ethiopian market is Kenya’s KCB Group. The bank’s Chairman Dr. Joseph Kinyua and CEO Paul Russo met with senior officials at the National Bank of Ethiopia earlier this June, indicating KCB’s readiness to expand into Ethiopia. Their visit aligns with Ethiopia’s broader economic reforms aimed at attracting cross-border investments and enhancing regional integration.
The directive outlines three legal channels through which foreign banks can enter the Ethiopian market. The first is by establishing wholly owned subsidiaries. For this option, foreign banks must provide a minimum paid-up capital of 5 billion Ethiopian Birr (about USD 36.7 million). They must also get a no-objection letter from their home country’s regulator and submit detailed operational and governance documents, including IT infrastructure and risk management frameworks. The license comes with a USD 2,500 investigation fee, a USD 150,000 licensing fee, and an annual renewal cost of Birr 200,000.
The second option is to operate through foreign bank branches, which may either accept deposits or not—but not both at the same time. These branches will function under the supervision of both the Ethiopian central bank and their parent company’s regulator. Each branch must also adhere to global regulatory standards such as the Basel framework, and the first branch opened will serve as the administrative hub for any future branches in Ethiopia.
The third option available is the setting up of representative offices. These offices can act as communication and research hubs, facilitating market research and promoting the parent bank’s services. However, they are not allowed to accept deposits or offer credit facilities. They also cannot use the word “bank” in their names unless clearly labelled as a representative office. The fees involved for this model include a USD 500 investigation fee, USD 1,500 license fee, and a Birr 75,000 annual renewal fee. Furthermore, such offices must maintain a deposit of USD 100,000 to cover operational costs.
The directive also strongly emphasizes data sovereignty. It requires that all customer data, both live and backup, be stored and processed only within Ethiopia. Any plan to transfer non-customer data abroad must be approved in advance by the central bank and follow strict encryption and access rules.
To maintain their licenses, all foreign banking institutions must renew their licenses annually between July 1 and September 30, and must also display the original license certificate in their physical offices for transparency and regulatory compliance.
Ethiopia, with a population of over 120 million people, a largely youthful demographic, and improved digital infrastructure, presents an attractive market for banks looking to expand their footprint in East Africa. Its improving macroeconomic environment and recent financial reforms make it one of the last but most promising banking markets to open up on the continent.
For banks like KCB and Equity Group, which are already active in East and Central Africa, this new directive is a major opportunity to deepen their regional presence. KCB’s early engagement with the Ethiopian authorities may give the bank a first-mover advantage, but actual entry will depend on strict adherence to the directive’s requirements, especially in areas such as compliance, capital adequacy, governance, and data protection.
As the Ethiopian banking space transforms, this reform is likely to attract more financial players from countries like Kenya, Nigeria, South Africa, and the UAE. However, success in Ethiopia’s newly liberalised banking industry will rely on a combination of financial strength, regulatory discipline, and respect for local laws.
