Regional lender Equity Bank has set up a commercial representative office in Addis Ababa, Ethiopia, with plans to start operations in Africa’s fastest growing economy in July.
The lender has resumed its continental expansion plan, which it halted about three years ago, with a focus on entering 10 African countries by the end of this year.
“Having completed Phase One of our expansion, the entry into Ethiopia is part of our Phase Two expansion in pursuit of our aspiration of being a Pan African Bank with presence in 10 African countries by the end of the year,” group chief executive officer James Mwangi said on Thursday.
“This will enable the bank to continue to scale up and unlock economies of scale especially in this era of digitisation and virtualisation of banking.”
The bank’s entry in Ethiopia, the continent’s second-most populous nation with more than 100 million people, has been informed by a wave of sweeping reforms that Prime Minister Abiy Ahmed has put in place to open up and democratise the economy which had, for long, been under tight control of the state.
Ethiopia is ranked by the International Monetary Fund as Africa’s fastest growing economy.
Equity Bank’s move comes after it announced its intentions to acquire 6.27 per cent shareholding in Atlas Mara Ltd at an estimated cost of Ksh10.7 billion ($107 million).
The Sub-Saharan African Atlas Mara Ltd, which was founded by former Barclays Plc chief executive Bob Diamond is relinquishing to Equity its operations in four markets – Mozambique, Rwanda, Tanzania and Zambia.
Equity Bank, with more than 13.5 million customers and 289 branches across the region, has operations in Kenya, Uganda, Rwanda, Tanzania, South Sudan and the Democratic Republic of Congo.
In 2015, the bank’s shareholders approved a Ksh20 billion ($200 million) new capital injection to drive the lender’s ambitious expansion programme to fruition.
Under the pan-African expansion plan, the lender had lined up countries such as Malawi, Mozambique, Zambia, Zimbabwe after its entry in Burundi and Ethiopia. It was then to turn to West Africa five years later, eyeing Cameroon, Ghana and Nigeria.
However, in early 2016, the bank’s board suspended the programme to consolidate its regional business and restructure the underperforming subsidiaries into money making ventures.
Equity Bank is listed on the Nairobi Securities Exchange and cross-listed on the Uganda Securities Exchange and Rwanda Stock Exchange.
Ethiopia has 18 licensed commercial banks, two of which are state-owned: Commercial Bank of Ethiopia and Development Bank of Ethiopia.
The country’s legal framework locked out foreign banks from its market, with international lenders opting to enter the economy through representative offices. But foreign investors are seeing a ray of hope as the Abiy administration pursues broad economic reforms to liberalise the financial sector.
Currently, Ethiopia has allowed some foreign banks to open liaison offices in Addis to facilitate credit to companies from their countries of origins.
In 2016 Ethiopian lawmakers made a landmark decision to relax the restriction on the licensing of foreign financial institutions to operate in the country, presenting a huge growth opportunity for regional and global banks.