Ethiopia’s central bank looks to loosen insurance market entry

By Business a.m.

The National Bank of Ethiopia (NBE), the country’s central bank, is considering opening up the insurance and microfinance sectors.

The proposal follows the government’s decision to open up the banking sector.

“The question now is whether we have to open up other finance sectors too, or just begin with the banking sector and leave the other sectors to be opened in the future. If we open up only the banking sector now and delay the others, we will have the opportunity to learn from the banking open-up and then proceed to others gradually. But there is also a need to open it up now,” Solomon Desta, vice governor for financial institutions supervision at the NBE, told journalists.

Insiders say the central bank will not be relaxing rules governing entry into the insurance sector soon because the sector is still at a very nascent stage. However, experts argue that opening up the banking sector and leaving the insurance sector alone would contradict each other because existing local insurers cannot then provide coverage for the big projects that will come along with the entry of foreign banks.

“For sure, the insurance sector will not be opened up very soon. It has to develop its capacity first,” said Desta.

Currently, there are 41 microfinance institutions, 18 insurers and one reinsurer in Ethiopia.