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The draft Equity Investment by Foreign Nationals and Foreign Owned Ethiopian Organizations in Banks states that “aggregate shareholding by foreign nationals and foreign-owned Ethiopian organizations in a bank, other than a foreign bank subsidiary, shall be limited to forty nine (49%) of the total subscribed shares of a bank.”
The National Bank of Ethiopia (NBE) has announced that aggregate foreign ownership in local banks will be capped at 49 percent. Under a new draft directive issued by NBE this week, the government has set one of the clearest parameters yet for foreign participation in the country’s long-protected banking industry.
The draft Equity Investment by Foreign Nationals and Foreign Owned Ethiopian Organizations in Banks states that “aggregate shareholding by foreign nationals and foreign-owned Ethiopian organizations in a bank, other than a foreign bank subsidiary, shall be limited to forty-nine (49%) of the total subscribed shares of a bank.”
The NBE noted that “promoting a strong and viable banking sector in Ethiopia is crucial for macro-economic stability and growth.” It added that “foreign equity investors are believed to bring strategic value to individual target banks and the banking system at large through strengthening capital, improving efficiency and technology, transferring knowledge and improving governance.”
The draft directive also emphasized the need for a clear regulatory framework, stating that “putting in place proper legal framework for regulating the equity investment of foreign nationals in banks is important to ensure safety and soundness of the banking sector.”
Under the proposed rules, a foreign natural person may not hold more than seven percent of a bank’s total subscribed shares, while a foreign corporate investor is limited to ten percent. Strategic investors—defined as reputable foreign banks, development finance institutions, or private equity funds—may acquire up to 40 percent of a bank’s shares.
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