Opportunity and Challenges of Foreign Investor Entry in Ethiopia Banking Sector
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Date
2024-03-21
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AAU
Abstract
This study aims to evaluate the opportunities and challenges associated with foreign investor entering Ethiopia’s banking market. The research’s goal was to pinpoint the various advantages that investor would present as well as the obstacles to their entry for domestic banks. A combination of qualitative and quantitative research method were used. Ten experts and professionals were specifically chosen for the study were interviewed in-depth, and thirty commercial banks in Ethiopia as well as higher officials from the national bank of Ethiopia provided quantitative date. STATA 14 was used to examine the gathered data and produce summery on results. The findings of the research demonstrate that introduction of international investor in to Ethiopia has the potential to strengthen the nation financial infrastructure and expand loan availability to a wide range of local businesses, regardless of size. In addition, the study’s findings show that the entry of foreign investor improves local banks efficiency because of the intense competition they will face. Furthermore, by allowing those financial institution to transfer new banking technologies, they help to advance and develop local financial systems. However, because those foreign investor have the potential and power to drive domestic banks out of the market due to their superior expertise, talent and strategy, they also pose a threat to the stability of the nation’s financial system. In addition to these, these investor occasionally share their knowledge of global problems with the host nation. The financial industry should be liberalized gradually as recommended for policy. These is because allowing the investor to operate freely could hurt domestic bank and make the situation harder to manage as it is unclear how these bank operate. Thus, they should progressively permit the government to look at and comprehended how they do business.