Ethiopia opening up its financial sector
Ethiopia expands access to its financial sector as it has approved Equity Group Holdings, Kenya’s biggest lender by market value to open a representative office in Addis Ababa. This will allow Equity Group to provide remittance services by partnering with an Ethiopian lender to target the three million Ethiopians living abroad. Equity Group’s entry into the country will give the lender access to a combined 500 million people in its six markets of operation including Uganda, Tanzania, Rwanda, South Sudan and the Democratic Republic of Congo.
However, Equity Group won’t be the first Kenyan bank to gain access into Ethiopia as their rival, KCB Group has already opened their representative office in Addis Ababa. Equity Group helped facilitate KSH 106.7 billion (USD 1.1 billion) of remittances to Kenya by end of 2018 through partnerships with global payment companies such as PayPal Holdings and Moneygram.
The nationalisation of lenders four decades ago resulted in the Ethiopian financial industry being closed to investors but given a population of more than 100 million which is served by only 18 commercial banks, Ethiopia is looking to expand access to its financial sector for foreign investment by working with the World Bank. This may result in establishing a capital market and modernising the country’s payment system. The government has broadened their political space to include opposition parties, actively engaged in regional diplomacy and announced a range of economic reforms designed to revitalize the economy by expanding the role of the private sector. This includes plans to gradually liberalise the economy and boost competition mainly to the sectors that have been dominated by key state-owned enterprises.
In October 2018, the World Bank approved USD 1.2 million from International Development Association (IDA) to support the Ethiopian government policies in an attempt to improve economic growth through political and economic transformation.