Abebaw Kassie (Ph.D)Abrham Tamiru Tesfaye2023-12-112023-12-112023-05-04http://etd.aau.edu.et/handle/123456789/536The Ethiopian government is moving toward opening the financial sector for foreign investors. This is with an anticipation to encourage competition and provide better services for consumers. While foreign banks can have a positive impact on the economy, they can slow economic growth and displace local banks so this study aimed to explore the challenges and prospects of foreign bank entry in the Ethiopian banking sector. To achieve this, a comparative study using five financial indicators was conducted with African countries with high and low GDP than Ethiopia. A mixed approach was used, and a survey questionnaire was distributed to 135 respondents with proportional quota sampling. Data from 17 commercial banks, the National Bank of Ethiopia, and the senior management of the bank were collected to analyze the data using descriptive statistics such as graphical representation, mean, standard deviation, frequency and percentage. The study found that the presence of foreign banks will contribute to the growth of the Ethiopian economy through financial innovation, technology and access to credit. However, they also presented significant challenges to their performance. The study also revealed that in terms of financial indicators, the Ethiopian banking sector is better than African countries. Thus, the entry of foreign banks can enhance the financial strength of domestic banks, but necessary preparations such as strategic adaptation, capacity building and training and development are needed beforehand they have been involved.enForeign Banks, Domestic Banks, Benefits, Challenges, Financial IndicatorsThesis