• Kenyan lender Equity Bank has initiated steps to enter the Ethiopian banking market, recently opened to foreign investment.
• Ethiopia offers a market of 120 million people with one of the continent's lowest banking penetration rates.
• The National Bank of Ethiopia recently issued directives inviting foreign banks, following new legislation adopted in December 2024.

The Kenyan banking group Equity Bank has begun procedures to establish itself in Ethiopia. This move capitalizes on the recent opening of the financial sector to foreign investors, the Ethiopian Investment Commission (EIC) announced on Saturday.

Equity CEO James Mwangi met with EIC Commissioner Zeleke Temesgen on September 12. Temesgen assured that his institution is "ready to provide the necessary support" to facilitate the bank's arrival.

Nairobi-based Equity operates in several East and Central African countries, including Kenya, Uganda, Rwanda, Tanzania, DRC, and South Sudan. It targets a market of over 120 million inhabitants, where the banking penetration rate remains among the continent's lowest. According to the IMF, private sector credit still represents only about 15% of GDP. This compares to over 30% in neighboring countries like Kenya or Tanzania. Bank deposits also remain limited, indicating weak but potentially growing financial intermediation.

Ethiopia adopted new banking legislation in December 2024. This law allows foreign institutions to establish subsidiaries, open branches, or acquire stakes of up to 40% in local banks. The National Bank of Ethiopia issued a directive in June 2025, inviting foreign banks to submit their applications. Concurrently, Addis Ababa has initiated a series of prudential and accounting reforms. These include the progressive adoption of IFRS 9 standards, alignment with Basel standards, and strengthening governance rules, notably to limit stakeholder-related exposures.

Equity thus joins its Kenyan competitor KCB, which also holds discussions with Addis Ababa authorities. Several regional banks hope to leverage this liberalization. They aim to capture a largely unbanked clientele and develop digital financial services. The IMF, however, highlights the sector's high concentration. The Commercial Bank of Ethiopia dominates the sector, holding 51% of assets alone. This represents five times more than its closest competitor, thereby limiting competition.

Furthermore, the interbank market remains embryonic. The NBE's supervisory capacities will require strengthening to accompany the opening without increasing systemic risks.

This article was initially published in French by Fiacre E. Kakpo

Adapted in English by Ange Jason Quenum