Ethiopia’s Delicate Balance to Progress, Opening Banking Sector, and Boosting MSMEs with Digital Lending
Ethiopia to Grant Up to Five Banking Licenses to Foreign Investors
In a bid to open up its financial services sector, Ethiopia plans to issue up to five banking licenses for foreign investors within the next five years .
The move is aimed at driving foreign investment inflows and boosting economic growth.
Foreign investors will have the option to form joint ventures with domestic players or establish local subsidiaries.
The move follows the government’s decision two years ago to grant a telecoms license to a private operator, breaking Ethio Telecom’s monopoly.
The country’s banking industry is currently dominated by the state-owned Commercial Bank of Ethiopia, with 29 locally owned players.
Ethiopia’s Delicate Balance Between Progress and Fragility
Ethiopia appears to be making strides in resolving internal conflicts, with the Tigray war over and peace efforts underway, alongside new talks with the Oromo Liberation Army, according to the Council on Foreign Relations.
The government is shifting its focus to re-engaging with development partners and addressing economic challenges.
However, the situation remains fragile, with continued suffering in Tigray, as forced displacements, the continued presence of Eritrean forces, and restricted humanitarian access persist.
The murder of Girma Yeshitila, a senior figure in Prime Minister Abiy’s Prosperity Party, highlights the tensions still simmering in the country.
While positive developments deserve support, the international community, including the United States, must be cautious and seek concrete indicators of normalization, respect for civil rights, and genuine progress on the ground.
Ethiopia Focuses on Data-Driven Digital Lending for MSMEs
Ethiopia recently held the second knowledge series, “Data-Driven MSME Digital Lending for an Inclusive Economy,” with the National Bank of Ethiopia, IFC, FSD-Ethiopia, Kifiya Financial Technology, and the Mastercard Foundation.
The series aims to address access to finance challenges faced by MSMEs in Ethiopia, bridge the knowledge gap in uncollateralized digital lending and credit scoring, and bring stakeholders together to drive disruption in leveraging digital financial services for MSMEs’ digital lending.
The first knowledge series in February 2022 focused on a collateral-free digital lending platform for MSMEs. The working capital finance gap for MSMEs in Ethiopia was estimated to be $4.9 billion in 2019, with SMEs accounting for 91% of the figure.
The knowledge series provides opportunities for stakeholders to discuss and develop strategies to enhance access to finance for MSMEs in Ethiopia.