Treasury & Banking in Ethiopia

Report date: 
22 Mar 2022

Chair’s Overview

Ethiopia is a deeply troubled country: it was the site of a major famine in the 1980s, and has a long history of civil and other wars, which have resulted in some former regions now being independent states. It has also had a series of revolutions, and turmoil continues to this day.

In these circumstances, business is – unsurprisingly – difficult, with foreign currency being difficult to access. Despite this, participants generally have successful businesses, with a remarkable consistency in approach and problems:

  • Most businesses provide infrastructure type hardware products. Typically, the hardware is sold outside the country, and paid for in hard currency. Warranty and maintenance services have to be provided onshore and billed in local currency – it is very difficult to remit the profits back to HQ, and trapped cash builds up.
  • The hardware imports are usually covered by LCs – but these can be expensive (up to 11%), and difficult to obtain. It is also not unusual for their settlement to be late, by up to nine months is one case.
  • No international banks operate in the country. This leads to the following issues:
    • The local banks often do not speak English, and have a tendency not to turn up for meetings when they have been arranged.
    • This often results in a need for face to face meetings, which can be challenging, with current travel restrictions
    • There is a need to recruit and maintain local staff to manage the resulting relationships – most treasurers do not like doing this.
    • Most processes are paper based, slow, and highly bureaucratic
    • The biggest local bank is Commercial Bank of Ethiopia, which tends to receive the lion’s share of foreign currency allocations – up to 75%, according to one participant. This bank tends to be even more bureaucratic and slow than the others
    • Some of the smaller banks are more dynamic and responsive, and some are offering internet banking services, though these do not necessarily comply with most corporates’ security or internal control requirements. Also, the internet can be shut down during school exams.
    • It is very difficult to do an adequate credit assessment of many of these banks. This makes it difficult to manage counterparty risk – especially given the high amounts of trapped cash.
    • Interest rates on local currency deposits are around 5%: inflation and currency depreciation are usually higher.
    • Dashen Bank received several compliments for being more responsive and customer focused than the others.
  • Non resident accounts are allowed in the country, and these can hold foreign currency. Resident accounts are allowed in foreign currencies, but 80% of incoming currency must be converted to local currency. There is concern that the government may confiscate the foreign currency in non resident accounts.
  • Participants were managing to get small amounts of hard currency remitted out of the country: one has recently seen the currency allocation more or less double to EUR 400,000 a month. There is the usual suggestion of buying bonds locally in local currency and selling them in the international markets for hard currency, but no-one has tried this. One participant looked at funding an NGO locally in local currency, in exchange for receiving hard currency offshore, but their Legal advised against it.
  • One participant is routing business for the country through a free trade zone in Djibouti. This has been quite successful.

Bottom line: as a war torn and famine stricken country, it is not surprising that Ethiopia is a difficult place to do business. But, with a population of over 100 million people, it is the second largest country in Africa (after Nigeria), so economic activity does take place. Items deemed essential, such as medicine and goods required for building infrastructure, can be imported, but long payment delays are not uncommon. Importers find local currency building up from their local service operations: the absence of foreign banks makes it challenging to manage this. Most have decided to set up a local treasury team, and one operates via Djibouti.

If you are prepared to accept these compromises, life can carry on.


This report was compiled by Monie Lindsey based on a Treasury Peer Call chaired by Damian Glendinning.

Topics covered in this report: 
Banking, Corporate Treasury, FX, Cash Repatriation, Letters of Credit (LC), Intercompany invoices, Sovereign Bonds
Service providers discussed in this report: 
Mashreq Bank, Nib International Bank, Wegagen Bank, Zemen Bank, Commercial Bank of Ethiopia, Awash Bank, Dashen Bank, Bunna Bank, Behran International Bank

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