Kenya’s Equity Bank has officially begun the process of entering the Ethiopian banking sector, following the country’s decision to open its financial market to foreign investment. The Ethiopian Investment Commission (EIC) confirmed the move, noting that Equity CEO James Mwangi met with EIC Commissioner Zeleke Temesgen on September 12, with the latter assuring full support to facilitate the bank’s arrival.
Ethiopia, home to more than 120 million people, presents a major opportunity with one of Africa’s lowest banking penetration rates. According to the IMF, private sector credit stands at only 15% of GDP, compared to more than 30% in neighboring Kenya and Tanzania. Bank deposits also remain low, suggesting significant growth potential in financial intermediation and digital banking.
The entry is enabled by Ethiopia’s December 2024 banking reform law, which permits foreign banks to establish subsidiaries, open branches, or acquire up to 40% stakes in local institutions. In June 2025, the National Bank of Ethiopia (NBE) issued directives inviting applications, alongside broader reforms such as adopting IFRS 9 standards, aligning with Basel rules, and tightening governance frameworks.
Equity joins its Kenyan rival KCB, which has also signaled interest in the Ethiopian market. Regional lenders see liberalization as a chance to tap into a largely unbanked population while expanding digital financial services. However, challenges remain: the Commercial Bank of Ethiopia dominates the sector with 51% of total assets, limiting competition. Additionally, Ethiopia’s nascent interbank market and limited supervisory capacity pose systemic risks that regulators will need to manage carefully.
