Abe Sano sees risk in opening Ethiopia’s banking sector door wide to foreign investors. He advises share restrictions as remedy
The Ethiopian government on Saturday announced that it is opening up the banking sector to foreign investors. It is a decision from the council of ministers with Abiy Ahmed’s leadership. The matter was not even debated in the Ethiopian Parliament.
The development has created reactions from Ethiopians on social media. There are those who tend to see, in fact with passion, the decision as something that would transform the sector in terms of service delivery and making more finances available for borrowers. The line of argument rather supports the rationale that the “council of ministers” put forward.
Prime Minister Abiy Ahmed’s administration, which was beating drums for inventing a “home-grown economic model,” made a case for opening the sector to foreigners. “Opening the sector to expatriate investors would help make service knowledge and technology-based, and transform the level of Ethiopia’s economic integration to the world market,” it said.
On the other hand, there are those who see danger in the move. There is even a tendency to see government decisions as a result of imposition from the Bretton Woods institutions. They see that the banking sector in Ethiopia is not fit enough to compete with giant foreign banks.
Commercial Bank of Ethiopia, the oldest and largest state-owned bank with over 1500 branches across the country and a huge revenue generator, President Abe Sano spoke to state media regarding the government’s decision to open up the banking sector for expatriate investors.
He sees a good side to it. But he also underscores the importance of exercising caution in the implementation of the policy. He seems to buy the case for opening up the market that was put forward by the “council of ministers.” Yet, he sees the menace that opening the door wide could bring about to domestic banks.
As much as closing the sector to foreign investors has impacted the growth of local banks, says Sano, opening the banking service door wide to the world market could have dangers. He underscores the importance of striking a balance between the two.
He advised the gradual opening of the sector to international competition to ensure that local banks are building up strength to the competition.
He says that international competition could create exposure to draw lessons from international practices. But to avoid harm to local banks, there is a need to limit shares to expatriate banks.
He seems to be suggesting that local banks be higher shareholders when the banking market opens for foreign investors. He thinks that the measure could transform the strength of local banks in a relatively short time.
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