After more than half a century of keeping foreign banks at bay, Ethiopia is finally opening its financial sector — a dramatic shift from decades of strict protectionism rooted not just in economic nationalism, but in the need for state control.

The country first shut its financial borders following the 1974 nationalisation of banks under the Derg military regime. Even after the regime fell, Ethiopia maintained its closed-door policy, wary of external influence in a sector long viewed as central to political and economic sovereignty.

Now, in a stark reversal, the government is extending an invitation to foreign banks and investors. The move comes amid deepening economic woes. Since 2018, foreign direct investment has plummeted, hit hard by internal conflict — particularly the civil war in Tigray — and economic mismanagement.

In July 2024, Ethiopia floated its currency under a new structural adjustment programme backed by the International Monetary Fund .

The birr’s value plunged 30% against the US dollar, pushing more Ethiopians into poverty and intensifying pressure on the government. Coupled with ongoing negotiations to restructure \$8.4 billion in external debt, the urgency behind the reforms is clear.

Interest in Ethiopia’s banking sector has been long-standing. Regional giants like Kenya’s KCB Group and South Africa’s Standard Bank have eyed the market for years. But access remains limited — only five foreign bank licences will be issued over the next five years, making competition tight.

While the move is being framed as part of a broader reform agenda, many observers see it as a sign of desperation rather than confidence. What lies ahead for Ethiopia’s financial system remains uncertain. One thing is clear: the rules of the game are changing in a country that once saw foreign banking as a threat.