The National Bank of Ethiopia (NBE) is set to consult stakeholders before deciding on the open-up of microfinance and insurance sectors for multinationals. The Bank has notified stakeholders to convene for the consultation meeting rescheduled for October 25, 2022, which was postponed from October 17, 2022.
The proposal whether to liberalize the microfinance and insurance sectors came after the government decided to open up the banking sector. But this is followed by questions from the microfinance and insurance sectors pushing for the open-up.
“The question now is whether we have to open up other finance sectors too, or just begin with the banking sector and leave the other sectors to be opened in the future. If we open up only the banking sector now and delay the others, we will have the opportunity to learn from the banking open-up and then proceed to others gradually. But there is also a need to open it up now,” Solomon Desta, vice governor for financial institutions supervision at the NBE, told The Reporter.
Insiders say the central bank will not allow the opening of the insurance sector soon since the sector is at a very nascent stage. However, experts argue that opening the banking sector and leaving the insurance sector contradict each other since the existing local insurers cannot serve the big projects that will come along with the entry of foreign banks.
“Hence, we will discuss the issue with all the stakeholders and decide the alternative. But for sure, the insurance sector will not be opened up very soon. It has to develop its capacity first,” added Solomon.
Currently there are 41 MFIs, 18 insurers and one reinsurer.
The central bank is currently finalizing an amendment to the 2008 Banking Business Proclamation after the council of ministers passed the banking open policy two months ago. The draft proclamation allows foreign banks to enter the Ethiopian market through the establishment of a subsidiary arm, branch, commercial representative office, or the acquisition of up to 30 percent of existing local banks. The central bank is also amending the Payment System Proclamation, which will allow the entry of foreign Fintechs.
“The financial sector is being opened for foreign investment. In particular, the coming of fintechs will accelerate the competition. “Especially with the coming of Safaricom as a digital financial service provider and payment instrument issuer, will help us to see the big changes we have witnessed in other countries like Kenya,” added Solomon.