Ethiopia Softens Banking Rules To Boost Foreign Exchange Reserves

Ethiopia has softened its banking rules and opened up the financial space in the country to about five million citizens who have changed to other nationalities, according to a report by Reuters.

The country’s parliament passed a bill on Wednesday (July 31), which would allow the people included in the bill to start their own lending businesses and buy shares in Ethiopian banks.

The initiative is one of many new financial reforms being pushed by Prime Minister Abiy Ahmed, whose term began last year. He wants to boost Ethiopia’s foreign exchange reserve, which has dropped dangerously low.

“The law will enable the Ethiopian-born diaspora to take part in the economic growth of the country,” said Lemlem Hadgo, chair of the Revenues, Budget and Finance Committee of parliament. “It will also address the grievances raised over the issue.”

The banking sphere in Ethiopia isn’t usually open to foreign investment and is led by two very old and profitable firms, Dashen and Awash Bank. The country’s financial sector is one of the most tightly controlled in Africa.

Many people who moved away but later decided to return are happy about the news. “We can finally invest in the financial sector,” said Addis Alemayehou, a businessman who returned to Ethiopia and has Canadian citizenship. “The financial sector is one of the most lucrative and well-managed; it’s a safe investment outside real estate.”

The prime minister isn’t stopping at just opening up banks to returning Ethiopians. The government also has plans to give two telecom licenses to firms that are not Ethiopian, which is notable because the country is one of the world’s last closed telecom markets.

One of the factors driving the change is the country’s young and rapidly expanding population. The country’s economy has been growing at a near double-digit yearly rate for more than 10 years. However, the leader’s initiatives have always been threatened by an undercurrent of ethnic violence that threatens Ethiopia’s growth.