Million Alemu Legal Services

The Banking Business Amendment Proclamation No. 1159/2019 has allowed Foreign Nationals of Ethiopian Origin[i]. With the view of putting in place the modality for allowing their investment in the banking business, the National Bank of Ethiopia has issued Directive No. SBB/73/2020[ii], “Manner of Equity Investment by Foreign Nationals of Ethiopian Origin in Banks”, which came into effect as of February 28^th 2020.

This legal update is aimed at listing out what Foreign Nationals of Ethiopian Origin should know about investing in Ethiopian banks with the view of being a shareholder.

1. Foreign Nationals of Ethiopian Origin must hold a valid identification card which is issued pursuant to        Proclamation No. 270/2002 that shows they are Foreign Nationals of Ethiopian Origin; 

2. Foreign Nationals of Ethiopian Origin can invest in banks that are under formation as well as banks that have already obtained the relevant license from the National Bank of Ethiopia; 

3. Foreign Nationals of Ethiopian Origin can invest in their names or in the name of an organization which is fully owned by Foreign Nationals of Ethiopian Origin and/or with Ethiopian nationals; 

4. Foreign Nationals of Ethiopian Origin must subscribe to the shares of the banks only in the geographical territory of Ethiopia; 

5. Foreign Nationals of Ethiopian Origin must pay for the shares and for the premium (service charge) in foreign currencies that is said to be acceptable by the National Bank of Ethiopia, from time to time and these payments must be made by transferring, only through the banking system, into the foreign currency account of the bank into which they are investing; 

6. Foreign Nationals of Ethiopian Origin can also use the dividend generated from their investment and that is eligible for repatriation by the National Bank of Ethiopia, for the purpose of share purchase; 

7. Foreign Nationals of Ethiopian Origin cannot transfer the foreign currency for the purpose of share purchase through foreign payment cards, cash (whether declared or not), and international money transfer organizations that cannot generate credit advice at the individual level showing the identity, amount, and purpose of the transfer; 

8. Those who were shareholders of banks and acquired the status of Foreign Nationals of Ethiopian Origin after the effective date of Directive No. SBB/73/2020, i.e., after February 28^th 2020, can continue holding these shares and can pay in Birr to the shares to which they have already subscribed; however, for new subscriptions, Foreign Nationals of Ethiopian Origin are required to pay in acceptable foreign currencies; 

9. In the case where Foreign Nationals of Ethiopian Origin invest in the name of an organization which is jointly owned by Foreign Nationals of Ethiopian Origin and with Ethiopian nationals, the subscription in foreign currency shall be to the extent of the percentage of shareholding by Foreign Nationals of Ethiopian Origin and the balance can be paid in Birr; 

10. Foreign Nationals of Ethiopian Origin can buy shares from Ethiopian nationals and yet the sale of the shares is required to be made in acceptable foreign currency transferred through banks and the share price cannot be less than the par value of the share; 

11. Foreign Nationals of Ethiopian Origin cannot acquire shares from Ethiopian nationals through donation; however, the transfer of shares is allowed where it is made through succession; and 

12. Foreign Nationals of Ethiopian Origin can earn the dividend from their investment in banks only in Birr and they cannot repatriate it; however, they can use it for the purpose of purchase and payment of newly issued and subscribed shares in the same bank.

  Posted on November 4, 2020 

[i] You can see the details of the updates from the article posted by us on https://www.millionlegalservices.com/index.php/resources/94-amendments-made-to-the-banking-business-proclamation and https://www.millionlegalservices.com/index.php/resources/90-legal-conditions-for-equity-investment-in-a-bank-by-foreign-nationals-of-ethiopian-origin.

[ii] we have attached herewith Directive No. SBB/73/2020. 

Attachments:

File	Description	File size
Manner of Equity Investment by Foreign Nationals of Ethiopian Origin in Banks Directive No. SBB-73-2020.pdf		9229 kB