Addis Ababa University (AAU) School of Commerce (SoC) Accounting and Finance Program Unit with the collaboration of Accounting Society of Ethiopia organized a biannual conference focused on opening the Ethiopian financial sector to different actors; its opportunities and challenges at School of Commerce on the 23^rd of July 2022.

T’enkir Seyfu (PhD), Lecturer and Corporate Finance Masters Program Coordinator at SoC, stated in an exclusive interview with the staff reporters that there is a law in preparation to support foreign banks and other actors to invest in the Ethiopian banking sector which will allow them to enter the financial sector in the country.

According to Dr. T’enkir, analyzing what is the blessing that comes with it and what challenges will there be when foreign banks or actors in general are allowed to enter the financial sector in Ethiopia is vitally important.

Regarding the opportunities, Dr. T’enkir stated as: “We expect foreign banks to bring modern business practices when they enter the country. This means the banking system will be modernized and will have a significant role in providing better and more efficient as well as quality services in the country.”

The joining of different foreign actors to the Ethiopian finance sector increases the level of competition which also leads the society to have different alternatives which includes solving the shortage of foreign currency which will also have positive impacts on other areas of investment, Dr. T’enkir added.

Apart from the opportunities, Dr. T’enkir mentioned the challenges as: “The problem starts with the fear that the indigenous banking industry may not be competitive compared to foreign competitors. This may lose national importance as the level of competition increases.”

“When foreign banks enter the country, they choose the best, ‘cherry picking’; they can take away the best banking customer from local banks. They can put domestic banks out of the competition by moving on those that are already established and in better shape. This may put pressure on the entire country’s economy,” Dr. T’enkir added on the challenges.

According to Dr. T’enkir, when a country’s economy is in crisis, they may make the crisis worse, instead of going to find a solution like the indigenous banks, they may not be willing to put themselves at risk. When there is such a trend, they can abandon it, they have a ‘cut and run’ strategy, he added.

“When foreign banks enter the country, the doubt about the ability of the National Bank of Ethiopia to properly manage this sector is one of the obstacles. As the level of complexity increases, if we don’t have the ability to manage that, things become difficult,” Dr. T’enkir finally stated.

Getnet Haile, President of Accounting Society Ethiopia, on his part said that since there are countries that have succeeded and failed in the entry of foreign banks, the conference was prepared to learn from this experience the “how?” and the “why?”. Based on this, it is necessary to explore the question of what kind of modality should be our input, he added.

“On the other hand, the regulator aims to explore what the national bank should do. Despite the work the government is doing, it is necessary to explore what needs to be done so that the law that comes out is convenient for those who come and does not harm the country,” Getnet said.

According to Getnet, what else should our banks do? “They need to be globally competitive; today’s competitive advantage of banks is technology. It is no longer possible to use a bankbook as it was used to be. Money transfers will be done through ATMs, mobile phones and other means, and whoever has the technology will be the winner”.

“As our banks don’t have as much capacity as the others, they should be merged. Even if a merger poses a threat to their existence, they can create better capabilities for them if they cooperate in the sector that requires technological capabilities,” Getnet finally stated.

Different presentations from different financial actors of Ethiopia like National Bank, Ethio- Telecom mobile money division and Commercial Bank of Ethiopia were delivered and thorough discussion was held by the participants.

Commercial Bank of Ethiopia, Bank of Abyssinia, Dashen Bank, Buna Bank, Zemen Bank, Amhara Bank, Buna Insurance and others sponsored the conference.

Editor: Abraham Girmay

Photo: Andualem Aseffa