Banking in Ethiopia: Regulations and Procedures

Banking is a rapidly growing industry in Ethiopia. Currently there are 30 commercial banks in Ethiopia, one owned by the Government of Ethiopia, 5 owned by regional states (all of them grew from Microfinance Instituions) and 3 Islamic Banks. In addition, there is the Development Bank of Ethiopia, which is not considered a commercial bank. Commercial Bank of Ethiopia is the largest, controlling the majority assets of the industry. 

In 2019, the Ethiopian parliament amended the 2008 proclamation. Accordingly, foreign nationals of Ethiopian origin, organizations fully owned by foreign nationals, and organizations jointly owned by Ethiopian nationals and foreign nationals of Ethiopian origin have been allowed to invest in the banking sector. However, such organizations should be registered under the laws of Ethiopia and have its head office in Ethiopia. Also, foreign nationals of Ethiopian origin and organizations partly or wholly owned by such persons are only allowed to invest in the acceptable foreign currencies. This means that such persons/organizations can only procure shares in an acceptable foreign currency.

Banking Business Proclamation No. 592/2008 DOWNLOAD
Banking Business Proclamation Amendment No. 1159/2019 DOWNLOAD

The following is a brief highlight of the governing banking business law, Proclamation No. 592/2008 and its amendment 1159/2019.

All banks have to be licensed by the countries’ financial regulatory body, the National Bank of Ethiopia to engage in banking business.

A Bank is formed as a share company and its memorandum and articles of association must obtain approval from the National Bank of Ethiopia.

The following are the Preconditions that needs to be fulfilled in order to obtain a banking business license:

  • Completed application and other accompanying documents;
  • Investigation fee paid during submission application;
  • Publish a notice of intention to engage in banking business in widely circulating newspapers;
  • A minimum of one-fourth of the subscribed shares shall be fully paid in cash;
  • Minimum paid-up capital paid in cash and deposited in a blocked account in a bank in the name of the prospective bank; (500,000,000 ETB)
  • Directors, the chief executive officer and senior executive officers of the bank shall meet the qualification criteria prescribed by the National Bank;
  • The premises, security arrangements and cash vault meeting National Bank standard.


After accepting the completed application, required information and payment of licensing fee, the NBE decides on the licensing application within 90 days.

Bank shares are of one class and registered as ordinary shares of the same par value. There are some restrictions and regulations on acquisition of shares. For example, except the Federal Government, a person including his wife and dependents less than 18 years and related to him by blood may not acquire more than 5 percent of a bank’s total shares. The national bank also limits the amount of shares that may be held in a bank by a company which is partially or fully owned by persons who have shares in the bank.

Shareholders who hold directly or indirectly two percent or more of the total subscribed capital of a bank may not acquire shares in other banks. Such persons are called influential shareholders. And any transfer of share that makes any person influential shareholder requires approval by the National Bank before such transfer is recorded in the register of shares.

The National Bank has broad powers in the affairs of banks. It can suspend or remove a CEO, director or other senior executives, limit the number of votes by proxy in shareholders meeting and voting right of holders who borrowed money from the bank. It also can suspend voting right of an influential shareholder when he fails to fulfill the ethical requirements of the National Bank.

Appointment of directors, CEO, or senior executive officers must be approved by the NBE. Terms of office, qualification, number of directors in the board and remuneration are also acts under strict supervision of the National Bank.

The banking business proclamation No. 592/2008 provides for criminal prosecution and penalty for acts which are in contravention to the law. For instance, transacting in a banking business without license, introducing new banking services, merger or takeover, entering into any arrangement or agreement for the sale or disposal, by amalgamation or otherwise, of its business, or effect major changes in its line of business, transfer or otherwise dispose of the whole or any part of its property, whether in or out of Ethiopia without prior approval by the NBE will be punishable with rigorous imprisonment from 10 to 15 years and with a fine of Birr 20,000.

National Bank of Ethiopia
Sudan Avenue
Tel: +251 11 5517438
Fax: +251 11 5514588