NBE Governor Calls on Ethiopian Banks to Strengthen Capital and Innovation Ahead of Foreign Competition

National Bank of Ethiopia (NBE) Governor Eyob Tekalign has urged domestic banks to strengthen their capital positions, accelerate innovation, and modernize their operations as Ethiopia prepares for greater competition from foreign financial institutions.

Speaking at the closing ceremony of Dashen Bank’s 30th anniversary celebration, the governor said Ethiopian banks must begin preparing for a more competitive environment as the country’s financial sector gradually opens to foreign participation.

According to Eyob, strong growth in deposits, assets, and capital remains important for banks, but these metrics alone are no longer sufficient to measure long-term success in an evolving financial landscape.

“Banks also need to ask whether their work is driving innovation, how far they have gone in using digital transformation, whether they are helping finance productive sectors and underserved communities, and what they are contributing to green taxonomy and sustainable finance,” he said.

The governor emphasized that Ethiopia needs financial institutions capable of competing beyond the domestic market. He called for banks that can support productive investment, expand opportunities for entrepreneurs, and contribute to sustainable economic development through modern financial services.

The governor’s comments follow Ethiopia’s 2024 legislative reforms opening the banking sector to foreign participation. These changes aim to modernize the financial ecosystem through international expertise and competition.

Despite significant interest, actual entry remains sparse. While Nigeria’s United Capital recently launched an investment banking subsidiary in Addis Ababa, no foreign commercial banks have yet begun deposit-taking or lending operations.

Progress has been hampered by regulatory hurdles, ownership caps, and valuation issues. For instance, Kenya’s KCB Bank has noted that structural and regulatory factors continue to influence its entry timeline.

Industry observers believe the eventual arrival of foreign competitors will increase pressure on domestic banks to improve efficiency, strengthen governance, adopt advanced technologies, and expand their product offerings.

Anticipated foreign competition is pressuring domestic banks to improve efficiency, governance, and technology. At its 30th anniversary, Dashen Bank reflected on its growth and pioneering role in Ethiopia’s banking sector, such as introducing ATM services.

CEO Asfaw Alemu noted that during its third decade, Dashen’s assets grew from 24.7 billion to 254.5 billion birr, and its paid-up capital increased from 1.2 billion to 14.3 billion birr, alongside rising revenue. The bank is now preparing for Ethiopia’s emerging capital market.

Marking the event, Dashen donated 30 million birr to the Deborah Foundation for children with intellectual disabilities. As the sector liberalizes, the NBE Governor emphasized that local banks must prioritize innovation and sustainability over traditional metrics to remain competitive.

source: Birrmetrics