Absa Bank is watching Ethiopia’s financial sector closely. It may enter the market if the government deepens banking reforms. The South African lender finds recent changes encouraging. However, it says they are not enough to justify a long-term commitment in such a tightly controlled market.
In March 2025, Ethiopia’s central bank passed Business Proclamation No. 1360/2025. This law allowed foreign investors to own stakes in local banks for the first time. But it also set strict limits. Foreign institutions can hold only 40% ownership. Foreign individuals are capped at 49%. Many banks, including Absa, see these caps as too low given the high capital needs and risks of banking.
“We are closely following developments in Ethiopia,” said Absa Group CEO Kenny Fihla during a visit to Nairobi. “The first necessary steps have been taken.” He added that more regulatory opening is needed—especially in banking. Absa will consider entering only when it has enough confidence for a long-term decision.
This cautious approach reflects wider concerns among international lenders. Ethiopia’s reforms are welcome. Yet current rules make meaningful control or returns hard to achieve. So most foreign banks remain on the sidelines—even though Ethiopia is one of Africa’s fastest-growing economies.
Meanwhile, Absa is pushing ahead in Kenya. It already runs a subsidiary there with $4.29 billion in assets. Kenya’s open regulatory environment makes it a strong base for regional growth.
“We always look for opportunities—organic or inorganic,” Fihla said. “But the rules must support sustainable business.” He noted that Kenya and other East African countries offer just that.
Kenya’s banking sector is consolidating fast. A 2024 law raised core capital requirements in stages. Banks must now hold $23.26 million by end-2025. The target rises to $77.52 million by 2029. This has spurred mergers and capital injections across the industry.
For example, Ecobank Kenya got a $27 million boost from its parent in March 2026. CIB Bank received $8.2 million in October 2025. Nigeria’s Zenith Bank is buying Paramount Bank. South Africa’s Nedbank agreed to take a 66% stake in NCBA Bank.
Absa has not announced a Kenyan acquisition yet. But Fihla confirmed the bank keeps exploring options. “We haven’t found the right deal,” he said. “But we’re still looking. When the time is right, we’ll act to grow our business.”
By contrast, Ethiopia remains a longer-term possibility. Unless the government eases foreign ownership caps and simplifies licensing, Absa Ethiopia banking entry will likely stay on hold. For now, Absa prefers markets where it can operate freely and earn solid returns.
Overall, Absa’s strategy shows a clear trend in African finance: expansion is accelerating—but only where regulation supports fair, competitive investment. Ethiopia has opened the door a crack. Whether it opens wide enough for Absa and others depends on what comes next.
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