In its regular meeting held today, the House of Representatives approved a decree allowing foreign banks to enter and operate in Ethiopia.

The approved banking bill aims to involve foreign banks in the country, open up the sector to foreign investment, and improve the competitiveness and efficiency of the banks, as explained by Chairman of the Standing Committee on Budget and Finance, Desalegn Wedaje.

According to the information obtained from the office of the council, the chairman of the standing committee emphasized that the decree is crucial for economic growth.

During the meeting, council members raised concerns and questions regarding the decree, expressing worries that allowing foreign banks to operate without adequate preparation may impact local banks.

Councilors highlighted the importance of a proclamation focusing on the competitiveness and capacity of local private banks. They also emphasized the need for the National Bank to establish an up-to-date operating system to monitor and manage foreign banks, ensuring that the money they generate in the country does not flee to other nations.

Furthermore, council members stressed the importance of the National Bank working diligently to manage the financial system while maintaining the sovereignty and security of the country, particularly concerning the digitalization of foreign banks.

The Governor of the National Bank of Ethiopia, Mamo Mehretu, provided an explanation on the entry of foreign banks into the country. “Foreign banks entering the country should be perceived as working together and partnering with local banks,” he clarified. He stressed that domestic banks must also bolster their financial capacity to remain competitive.

Additionally, Mamo Mehretu confirmed that the National Bank will fulfill its legal responsibilities in regulating and overseeing the banks.

While various economic sectors in Ethiopia have historically been off-limits to foreign companies, the government has recently expressed its intention to open up the banking sector. Local banks are being advised to enhance their readiness for increased competition.

The decision to allow foreign banks in Ethiopia is aimed at fostering connections with the global market, boosting foreign currency reserves, and promoting internationally competitive economic growth.

Prime Minister Abiy Ahmed, in its recent speech to Parliament, highlighted that Ethiopian banks have operated independently for the past two decades. However, it is now recognized that this approach is no longer sustainable as more foreign currency and resources are required.

The Prime Minister urged banks to adapt to the changing landscape by modernizing their operations and embracing technological advancements to stay competitive amid the influx of foreign banks into the sector.