ADDIS ABABA – The National Bank of Ethiopia (NBE) has issued licenses to eight new private commercial banks, its official said on Wednesday.
The central bank has been receiving several requests from banks’ under formation to obtain licenses following the recent reforms made to the sector, said Frezer Ayalew, director of Bank Supervision at NBE, speaking to a state-run news agency.
Last year, the central bank also revised a decade-old ‘minimum capital requirement for banks’ under directive SBB/78/2021. This has raised the paid-up capital for commercial banks from 500 million to five billion birr.
Of 24 new private Banks under formation, Frezer said eight that complied with NBE’s requirements have now been granted the license to proceed to the establishment phase.
Three others are expected to fulfill the requirements in the next three months and could acquire the license, he added.
The NBE said it will continue to supervise the establishment process of the newly licensed banks. “If the establishment process fails, the capital raised from stakeholders will be returned,” Frezer added.
Apart from the new banks, the central bank also said two microfinance financial institutions are in the process of relicensing that will transform them into full-fledged banks as per the NBE of SBB/74/2020 directive.
The directive issued more than a year ago allows microfinance institutions to evolve into commercial banks. Three institutions have already transformed themselves into commercial banks, to date.
Frezer said the increase in the commercial sector will create more job opportunities for citizens in addition to availing more banking options in the finance sector.
A total of 19 private commercial banks operate in Ethiopia, employing more than 120,000 people.
The banking industry of Ethiopia remains closed to foreign banks.
However, Prime Minister Abiy Ahmed announced the government’s plan to open up the sector to foreign competition, adding the government is preparing policies to open up the banking industry.
“Banks need to prepare themselves with modern ways and information technologies,” he told the parliamentarians last February.