Kenya’s KCB Bank on Thursday expressed its desire to engage in the Ethiopian financial sector, becoming the latest bank to show such an interest in Africa's second most populous country with an estimated population of 120 million people.
The expression of interest comes after a delegation of senior executives from KCB Bank, including the bank's CEO, finance officer and secretary, visited the Ethiopian Investment Commission (EIC) in Addis Ababa where they held talks with Ethiopian finance officials.
The delegation commended the Ethiopian government's recent decision to open up the financial sector to foreign investors.
Temesgen Tilahun, Deputy Commissioner of EIC, briefed the delegation about the investment policies, recent economic reforms and the objective of opening up the financial sector to foreign investors.
In September, Ethiopia's Council of Ministers passed a landmark decision to open up the country's banking sector to foreign investors.
The first ever move was a part of the government's economic reform that is opening previously state-controlled sectors to foreign investors.
The National Bank of Ethiopia (NBE) has been working on amending the law and regulatory system in a bid to change the banking policy.
According to the prime minister’s office, opening the sector to foreign investment is expected to support banking services in Ethiopia and would take the country's economic link with the international market to "a higher level".
The move would also bring about competitiveness and efficiency in the financial sector while boosting the inflow of foreign capital and job opportunities, the council observed.
According to NBE, the financial sector has shown strong growth in the last four years, during which the number of commercial banks increased from 18 to 30, and their branches reached 8,944 from 5,564 as of June 30, 2022.
The total assets of banks also grew from 1.3 trillion Birr ($242 billion) to 2.4 trillion Birr ($446.8 billion), registering a 92 per cent growth.
Their cumulative annual net profit has jumped by 122 per cent to 49.9 billion Birr ($9.3 billion) in the recently concluded financial year as compared to 2019.
Get ready for competition
The fact that Ethiopia has closed its doors to foreign banks has benefited the sector until now, Prime Minister Abiy Ahmed told lawmakers in February.
"But after this, banks need to prepare themselves with modern ways and information technologies," he added.
KCB's interest to enter the Ethiopian finance sector also comes as Kenyan banks are threatened by another crisis triggered by the deteriorating economic environment and the persistent Russia-Ukraine military conflict after demonstrating strong recovery from the economic falling-out effects of the Covid-19 pandemic.
KCB has over 125 years of experience in the banking sector and is operating in seven East African countries, according to EIC.