Assessment, Risks And Benefits Of Foreign Banks Entry To Ethiopia

Abstract

The study aimed to investigate various aspects of foreign bank entry into Ethiopia's banking sector, including assessments, attracting factors, benefits, risks, and impacts. It employed a descriptive research design and a mixed-research approach, targeting key personnel from 31 banks in Ethiopia, including the Development Bank of Ethiopia. Data were collected through questionnaires and interviews, with a sample size determined using purposive and simple random sampling techniques. Statistical analysis was conducted using SPSS version 26.The findings highlighted Ethiopia's growing economy, untapped market, government initiatives, and natural resources as highly attractive factors for foreign bank entry. However, risks such as dominance, lack of local commitment, cream-skimming behavior, and challenges related to regulatory oversight and capital mobilization were identified. Despite these risks, there was a positive perception of benefits, including technological advancement, market development, competition enhancement, and attracting foreign investments. To capitalize on the perceived attractiveness of Ethiopia's economy, and the study recommends promoting these factors to potential investors. Additionally, policymakers are urged to address concerns regarding the potential dominance of foreign banks by implementing regulatory measures that promote competition and ensure a level playing field for domestic banks