Ethiopia has taken a bold move aimed at liberalising the country’s banking sector.
According to details reaching Taarifa Business Desk, Ethiopia has instituted a committee to liberalise the banking sector. The committee has already started work to amend Ethiopia’s half-a-century old financial code.
A new code guiding the country’s banking sector will allow the opening up of the financial sector, the head of the committee was quoted saying. Less than 15% of Ethiopians have access to a bank account, highlighting the opportunity for foreign lenders.
Ethiopian Press reported that the committee’s work plan states the first draft of the financial services code must be ready by December 2022.
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On March 17, 2022, the committee met in the capital Addis Ababa to brainstorm on the new code to guide the country’s banking sector. The new Financial Service Code will determine engagement modalities of foreign banks in Ethiopia’s financial industry.
The country’s shift away from its past isolation is part of the grand reform agenda under Abiy Ahmed Ali the 4th prime minister of the Federal Democratic Republic of Ethiopia who rose to power since 2 April 2018. Prime minister Abiy Ahmed of Ethiopia, has since accelerated a radical reform programme that is overturning politics.
Ethiopia has for the past decades closed its doors to foreign businesses maintaining a tight lid on a market size of 115 million people.
However, in Prime Minister Abiy Ahmed view, this has to change and bring Ethiopia into a globalised world.
According reformist Prime Minister Abiy Ahmed, “My economic model is capitalism. If you give me $100bn now, I can’t use it. There is not only money, there is talent and experience. That’s why we need the private sector.”
Thus the liberalization of the banking sector is in line with his ambitious reform agenda. Kenyan lenders such as KCB Group to set up operations in the populous nation. Kenyan banks such as Equity Group and KCB Group have expressed ambitions to run fully-fledged operations in the neighbouring country.
Alemante Agidew, Legal and Justice Service Division State Minister at the Ethiopian Ministry of Justice is leading the committee that is drafting the new banking code.
“The new code is necessitated to cope with the new direction the economy is going in. This includes a capital market and opening up of the economy for foreign players,” Alemante said on Tuesday.