The National Bank of Ethiopia issued Directive No. SBB/94/2025 at the start of 2025, establishing a formal licensing framework for foreign banks seeking to operate in Ethiopia through subsidiaries, branches or representative offices. The directive marks a significant step in the opening of Africa's second most populous country's financial sector to international banking institutions, setting out the capital requirements, application procedures and operational conditions that foreign entrants must meet.
For decades, Ethiopia's banking sector was closed to foreign ownership and participation, with all licensed commercial banks required to be domestically owned. The country's gradual move towards financial sector liberalisation — part of broader economic reforms — has been closely watched by international banks and development finance institutions that see Ethiopia's large and underbanked population as a substantial long-term opportunity.
ETB 5 BILLION CAPITAL FLOOR FOR BRANCHES
Under Directive SBB/94/2025, foreign bank branches seeking to establish operations in Ethiopia are required to maintain permanently assigned capital of Ethiopian birr 5 billion, which must be inwardly remitted in foreign currency. This capital floor serves as the regulator's threshold for ensuring that foreign branches operating in the country are backed by sufficient financial resources to protect depositors and meet local obligations, and the foreign currency remittance requirement addresses concerns about capital actually flowing into the Ethiopian financial system.
The ETB 5 billion requirement also functions as a de facto filter, limiting branch licences to institutions of sufficient scale and financial strength. Smaller foreign banks or those with limited balance sheet capacity would be directed towards the subsidiary route — where capitalisation requirements may differ — or towards the representative office structure, which is restricted to non-banking activities and therefore carries a lower regulatory burden.
Representative offices under the directive are limited to liaison functions and market research, explicitly excluding the taking of deposits, lending and other core banking activities. This creates a pathway for foreign banks to establish a presence and build market knowledge in Ethiopia without committing the capital required for a full branch or subsidiary operation, while ensuring that the non-banking nature of such offices is clearly defined and enforceable.
NINETY-DAY REVIEW AND TWELVE-MONTH COMMENCEMENT CLOCK
The National Bank of Ethiopia has set a 90 calendar-day window within which it must review completed licence applications, providing foreign banks with a defined timeline for the regulatory process. The 90-day period begins upon receipt of a complete application — a standard that places the onus on applicants to submit thorough documentation — and is intended to give the NBE sufficient time to conduct a full assessment of the applying institution's financial soundness, governance, compliance record and fitness to operate in Ethiopia.
Licensed subsidiaries are required to commence banking operations within 12 months of receiving their licence. This commencement clock is designed to prevent institutions from securing licences speculatively and then delaying their entry into the market, which could inhibit the competitive and market-development benefits that the framework is intended to generate. Failure to commence within the stipulated period would presumably expose the licence to revocation under the directive's terms.
The introduction of Directive SBB/94/2025 positions Ethiopia to attract international banking institutions at a time when the country's economy — the largest in East Africa by population — is continuing to grow, with significant infrastructure investment, agricultural sector development and a nascent manufacturing base all creating demand for sophisticated banking services. The directive provides the formal legal foundation on which foreign banks can now structure their entry strategies into what is expected to be one of Africa's most consequential frontier banking markets.