In a move that signals a turning point in East Africa’s financial evolution, Ethiopia has officially opened its banking industry to foreign participation, following the release of Directive SBB/94/2025 by the National Bank of Ethiopia. This landmark reform breaks from decades of financial protectionism and places the continent’s second-most populous country on the radar of global banks, investors, and fintech operators.

Ethiopia’s financial sector has long been closed to international players, yet it hosts a population of over 120 million, with formal banking access at just 40%. That means more than 70 million people are underbanked or unbanked, representing a huge opportunity for digital-first banking, inclusive finance, and international capital.

Now, with foreign banks permitted to establish subsidiaries or joint ventures, the door is open for institutions like Standard Chartered, Ecobank, and Gulf-based lenders to enter the market. Their entry could accelerate everything from SME lending and mortgage markets to cross-border trade finance, all of which are crucial to unlocking the next phase of Ethiopia’s economic growth.

This is not just a win for Ethiopia, it raises the stakes for competitors across the East African corridor.

Ethiopia’s decision introduces a fresh layer of competition into East Africa’s tightly contested financial services sector. Countries like Kenya and Rwanda, long considered regional leaders in banking innovation, must now contend with Ethiopia’s size and reform momentum. Investors and fintechs exploring regional expansion may now consider Ethiopia a viable base, especially with reforms around currency floatation, debt restructuring, and an ongoing IMF-backed liberalisation plan already in motion.

For brands and institutions already operating in the region, this reform raises questions: Will Ethiopia become the next financial hub? Can it leapfrog its neighbours in attracting fintech partnerships, microfinance investment, or Islamic banking capital?

By opening up to international banking players, Ethiopia is not just seeking capital, it is betting on financial inclusion as an engine for growth. The reform signals intent to modernize infrastructure, drive savings culture, and digitize everyday payments.

This could unleash new ecosystems for agent banking, mobile wallets, and embedded finance, especially as international institutions bring in not only money, but also the technology and systems needed to scale. For brands focused on retail, agriculture, education, or real estate, this growing access to formal banking tools means more bankable consumers, increased credit availability, and a more structured economic environment.

This policy shift also aligns closely with AfCFTA’s goals of deeper financial integration, cross-border banking, and capital mobility. For Ethiopia, a previously insulated economy, this is a clear step toward becoming more embedded in the continental market framework. But the true test lies ahead; the current momentum could be derailed without the right regulatory stability or political continuity. And while foreign interest is high, execution risks remain, currency volatility, bureaucratic hurdles, and the need for local banking partnerships could all slow progress.