Kenyan banks set to enter Ethiopian market after nod
By John Otini, June 27, 2025Kenyan banks are poised for a strategic opportunity after the National Bank of Ethiopia announced its readiness to issue licenses to foreign banks in a move that could mirror Safaricom’s foray during the opening up of the telecoms market in 2019.
Ethiopia’s central bank on Wednesday invited international banks and investors to apply for licences, signalling a significant shift in policy after decades of a closed banking market.
“Kenyan banks are poised to enter the Ethiopian market after Ethiopia recently removed restrictions on foreign banks. So far, No Kenyan bank has a full-fledged license to operate in Ethiopia. Just as required in Kenya, Kenyan banks would have no problem applying for licenses to operate in any jurisdictions,” said KBA chief executive Raimond Molenje.
Leading lenders
The announcement by the National Bank of Ethiopia is expected to spark a wave of interest among Kenya’s leading lenders, particularly Equity Bank and KCB Group, which already maintain representative offices in Addis Ababa.
With the legal framework now in place, these early movers are set to leverage their regional experience to establish a firmer presence in Africa’s second-most populous country.
“NBE is very pleased to declare that the Ethiopian banking sector is hereby open for foreign participation and that applications by foreign banks and investors can be submitted to NBE from today onwards,” the central bank said in a statement. A separate directive issued by the bank capped foreign strategic investor ownership in local lenders at 40 per cent.
The reforms are part of a broader economic transformation backed by a four-year, $3.4 billion programme with the International Monetary Fund. Ethiopia is also pursuing an $8.4 billion debt restructuring deal with its official creditors, and recent months have seen ambitious plans to float its birr currency, all aimed at revitalising the economy and improving investor confidence.
For Kenyan banks, Ethiopia represents an untapped market of immense potential. With over 120 million people and a banking penetration rate of just 46 per cent, compared to Kenya’s 84 per cent, the opportunities to expand financial services are considerable.
Additionally, Ethiopia’s youthful population and rapid urbanisation make it fertile ground for digital banking solutions—an area in which Kenyan banks have developed world-class platforms. The move follows Ethiopia’s landmark 2022 decision to open its telecoms industry, which saw a Safaricom-led consortium become the first foreign entity to operate a mobile network in the country.
Since its launch, Safaricom Ethiopia has attracted millions of subscribers, offering a strong signal of consumer appetite for modern services and the ability of Kenyan corporates to adapt quickly to the Ethiopian market.
Banking industry insiders in Nairobi say Kenya’s top lenders are already evaluating market entry strategies ranging from full branch openings and local acquisitions to digital-only models targeting Ethiopia’s large unbanked population. The top two banks in Kenya must be closely monitoring developments in Ethiopia as they remain committed to growing their regional footprint.
Equity Group, which already has operations in six African countries, also stands to benefit from first-mover advantage. The bank has in recent years refocused its growth strategy on regional expansion and digitisation, and Ethiopia—often dubbed the “last frontier” for African banking—has long been on its radar.
Potential lifeline
The opening up of Ethiopia’s banking sector also offers a potential lifeline for Kenyan banks grappling with a saturated domestic market and increasing regulatory costs. Diversifying into new markets could not only boost revenue but also hedge against local economic shocks.
The National Bank of Ethiopia’s move follows parliamentary approval in December of a new law that allows foreign banks to open subsidiaries, establish branches, or partner with local institutions. This framework has now provided the clarity and confidence investors have been waiting for.
Still, challenges remain. Ethiopia’s currency regime, regulatory landscape, and state dominance in banking pose hurdles that foreign entrants will need to navigate carefully. Nonetheless, the promise of a high-growth, underserved market is likely to outweigh the risks for Kenyan banks hungry for expansion.
As the region watches Ethiopia’s banking transformation unfold, Kenya’s lenders appear better placed than most to seize the moment. The coming months will reveal just how fast they can turn opportunity into dominance in a once-inaccessible market.