Foreign Bank Entry in Ethiopia: Prospects & Challenges‖

Abstract

During the past four decades, since 1975, foreign banks have not been allowed to operate in Ethiopia. The underlying rationale to conduct this study relies on what would be the outcome of allowing foreign bank entry in the country? With in this context, the aim of the study is to examine prospects and challenges of allowing foreign banks Ethiopia. Mixed research approach was employed for the analysis of data collected through interview and questionnaires. Data was analyzed using descriptive statistics and presented using frequencies, percentages and tables. Results and discussions were produced based on responses obtained through questionnaires and interviews. Allowing foreign bank entry is advantageous to the overall economy in general and financial system in particular considering its net benefits to the consumers, financial system and the overall economy viewpoint. Upgrading the use of the state-of-the-art technologies being implemented somewhere else in others countries should be implemented by the regulatory organs and local banks. Domestic banks should focuses on; capacity development, implementation of modern banking technologies, developing new and wide range of bank products and increasing their capital position. Merger and acquisition form of entry as equity investors in existing or new banks allowing majority ownership for Ethiopian investors is advantageous for knowledge transfer and strengthen local banks as well as ensuring their survival that should be recommended to the regulatory organ. The other policy recommendation to the regulatory organ (NBE) is foreign bank entry via subsidiary is preferable to resource mobilization and enhancing access to finance for the majority.