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Merits and Demerits of Allowing Entry of Foreign Banks into the Ethiopian Banking Sector: lesson s from Selected Countries

Abstract: 

<p><em>The main objective of this study is to analyze benefits and costs of participation of foreign banks in the Ethiopian banking sector by providing empirical evidences from selected countries and then from their experiences draws certain policy implications that are relevant to particular situations of the country. The study will use simple descriptive statistics to examine costs and benefits of foreign banks&#39; entry into the Ethiopian banking sector. As in the case of other developing countries although participation of foreign banks in the Ethiopian banking sector has some potential risks such as foreign banks&#39; dominance in the financial sector, exposure of the host country&#39;s economy to economic shocks and fluctuations in home countries, less credit to small and medium-sized enterprises (SMEs) and profit remittances and capital flight especially during economic crisis, which lead to shortage of foreign exchange, the key conclusion of this study indicates that it has significant benefits to the growth of real sectors in general and financial sectors in particular in the country. The benefits include improving efficiency in the banking system through competitive pressures on local banks, higher economic and income growth, increasing know-how in the banking services, ensuring overall economic and financial stabilities and enhancing technological progress and innovations in the banking sector. Thus, foreign banks&#39; participation in the Ethiopian banking sector is very crucial in enhancing overall development in general and financial sector development in particular.</em></p>

Corporate Author: 
Alemayehu Seyoum(Editor) & Ethiopian Economic Association/Ethiopian Economic Policy Research Institute
Publisher: 
Ethiopian Economic Association (EEA)
Primary Descriptors: 

<p>Banks and Banking</p>

Secondary Descriptor: 

<p>Finance</p>

Geographic Descriptors: 
Ethiopia
Cataloge Date: 
02/27/2013
Broad Subject heading: 
Banks and banking, Foreign
Call Number: 
330.963 PRO 2004
Serial Key Title: 
Proceedings of the First International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
I
Publication date: 
2013-05-27 00:00:00
Forum or Discussion date: 
2013-02-27 00:00:00
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annualy
Author: