Includes special features of this country’s banking system and rules/laws that might impact U.S. business.

The GOE allowed the establishment of private banks and insurance companies in 1994, but does not yet permit  foreign ownership in this sector. The Ethiopian banking sector is currently comprised of a central bank (The National Bank of Ethiopia or NBE), one state owned development bank, a government owned commercial bank  and sixteen private banks. Under the Growth and Transformation Plan II (GTP II), NBE planned to increase the minimum capital for banks to operate to 2 billion Birr ($90 million) and instructed all commercial banks to increase their capital to that amount by 2020. Foreign banks are not permitted to provide financial services in Ethiopia, but the sector may open up in the medium term as the government of Prime Minister Abiy Ahmed pursues broad economic reforms. Currently, Ethiopia has allowed a small number foreign banks to open liaison offices in Addis Ababa to facilitate credit to companies from their countries of origins. Chinese, German, Kenyan, Turkish, and South African banks have opened liaison offices in Ethiopia.

Based on the most recently released data, the Commercial Bank of Ethiopia (CBE) holds more than 60 percent of total bank deposits, bank loans and foreign exchange. NBE controls the bank’s minimum deposit rate, which now stands at 7 percent, while loan interest rates are allowed to float. Real deposit interest rates have been negative in recent years due to inflation, which stood at 11 percent in mid 2019.

The state-owned Commercial Bank of Ethiopia (CBE) dominates the market in terms of assets, deposits, bank branches, and total banking workforce. The other government-owned bank is the Development Bank of Ethiopia (DBE), which provides loans to investors operating in priority sectors. DBE extends short, medium, and long-term loans for viable development projects, including industrial and agricultural projects. DBE also provides other banking services such as checking and saving accounts to its clients. The DBE has been plagued for years by a portfolio with a high percentage of non-performing loans (NPL’s), inefficient capital allocation, and corruption.  As such, it has been a major target of PM Abiy’s reform campaign, and is currently undergoing an extensive restructuring process.

NBE aims to foster monetary stability and a sound financial system, maintaining credit and exchange conditions conducive to the balanced growth of the economy. NBE may engage with banks and other financial institutions in the discount, rediscount, purchase, or sale of duly signed and endorsed bills of exchange, promissory notes, acceptances, and other credit instruments with maturity periods not exceeding 180 days from the date of their discount, rediscount, or acquisition by the bank. The bank may buy, sell, and hold foreign currency notes and coins and such documents and instruments, including telegraphic transfers, as they are customarily employed in international payments or transfers of funds. Lack of access to finance is a significant constraint for local businesses. In 2015, NBE allowed commercial banks to provide mobile banking service and agent banking. Pursuant to NBE’s permit, many of the commercial banks added mobile and agent banking in their line of services.

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