Equity Bank and KCB could become the latest Kenyan firms to follow Safaricom into Ethiopia as the populous country plots a framework for the operation of foreign-owned banks.
Ethiopia’s protectionist policies have made it practically impossible for foreign banks to enter the market. Now, change is coming as a committee has been formed to liberalize the sector.
It was a similar liberalization push in the telecommunications sector that opened up the path for Safaricom’s entry into Ethiopia.
The newly formed committee in the PM Abiy Ahmed administration is mandated with drafting a new financial services code for Ethiopia. The code would usher in foreign-owned banks looking to operate in Ethiopia.
The draft financial services code is expected to be completed by the end of 2022. It will also open up Ethiopia’s capital markets.
“The new code is necessitated to cope with the new direction the economy is going in. This includes a capital market and opening up of the economy for foreign players,” stated Alemante Agidew, Legal and Justice Service Division State Minister at the Ethiopian Ministry of Justice.
Equity and KCB have been looking to East Africa for continued growth, and have demonstrated strong performances by their regional subsidiaries. KCB this week revealed plans to enter DRC, following Equity’s lead.
Equity expects Kinshasa to be its biggest market by 2025, overtaking Kenya.
With Ethiopia boasting a population of over 100 million, the financial services giants will no doubt be taking a look at the possibilities.
When KCB announced its 2021 Full Year results, KCB Group Chairman Andrew Kairu stated: “The benefits of our regional expansion continue to positively contribute to the KCB’s performance. In 2021, the profit before-tax contribution from Group businesses went up to 13.7%, putting us on track towards our 20% target this year. KCB will continue exploring and pursuing attractive regional expansion opportunities to enhance our regional participation, accelerate growth, and maintain sustainable long-term performance.”
“Our future has additional opportunities to exploit, details of which will be communicated as they develop,” he added.