Equity Bank Group #ticker:EQTY has opened a representative office in Addis Ababa, joining KCB #ticker:KCB in the race to crack the Ethiopian market that has so far remained closed to foreign lenders.
In a statement Thursday, Equity said that it expects the new office to be fully operational next month following the acquisition of a licence.
The Nairobi Securities Exchange-listed lender has appointed an insider, Hassan Maalim, a senior business manager based in Nairobi, to head the unit.
He has worked with the bank since 2005.
While representative offices are not permitted to undertake banking business, such as deposit-taking and lending, they serve as marketing and liaison centres for their parent banks. They are thus seen as a stepping stone to future rollout of a fully-fledged bank once the pre-requisite licences are granted.
“Having completed phase one of our (regional) expansion, the entry into Ethiopia is part of our phase two expansion drive in pursuit of our aspiration of being a Pan African Bank with a presence in 10 African countries by the end of the year,” said Equity Group chief executive officer James Mwangi in a statement.
Ethiopia’s banking sector has so far remained closed to foreign banks, but aggressive economic reforms currently being rolled out by Prime Minister Abiy Ahmed’s government have raised the prospects of the sector, opening up to foreign investment.
The insulated market means that less than 15 percent of its 100 million people have access to a bank account, as per available statistics. “The entry follows Ethiopia’s government appointment of a privatisation commission and the ongoing reforms which are aimed at promoting a growing private sector,” Equity Bank said.
The lender already operates regional subsidiaries in Tanzania, Uganda, Rwanda, South Sudan and the Democratic Republic of Congo. Equity recently announced a Sh10.6 billion share swap deal (yet to be concluded) with London-listed Atlas Mara to acquire four banks in Rwanda, Zambia, Tanzania and Mozambique; which will give it a foothold in southern Africa and raise its Africa presence to eight countries.
Another listed lender, KCB, opened its representative office in Kenya’s northern neighbour in 2015, and has recently said it will be looking to make its entry through a partnership with an Ethiopian bank or opening a fully-fledged subsidiary in the country once the market is opened to foreign lenders. “Our main area of focus is to have a business and presence in Ethiopia. We hope that by the end of 2020 we can be allowed to go further whether by opening a branch or through our mobile lending platform,” KCB chief executive Joshua Oigara told the Business Daily in a March interview.
A number of other Kenyan financial institutions, including Co-operative Bank and Stanbic (through its South African parent Standard Bank Group) have over the years expressed interest to enter the Ethiopian market. Standard Bank received a licence to open a representative office in Ethiopia in 2015.
In addition to the financial sector, the Ethiopia government is also said to be considering opening up the telecommunications sector to foreign investors, which would benefit Kenyan telco Safaricom, potentially through a rollout of its M-Pesa business in that country.