Central bank regulators are working on a directive that would govern licensing procedures for banks looking to open branches inside Special Economic Zones (SEZs).

The ‘Licensing and supervision of banking business requirements for licensing a bank branch to operate in SEZs’ directive will require banks to ensure SEZ branches provide forex services. It also sets asset and capital adequacy ratio requirements.

Banks must have a liquidity ratio of greater than three points above the minimum threshold set by the National Bank of Ethiopia (NBE) to apply for a permit to open an SEZ branch, while their non-performing loan (NPL) ratio cannot exceed five percent.

Following Parliament’s approval of the SEZ Proclamation a few months ago, the National Investment Board, Ethiopian Investment Commission, and the Industrial Parks Development Corporation (IPDC) are working to transform existing industrial parks into SEZs.

Parks are subject to stringent capital and size requirements, among others.

Officials hope SEZs will offer what industrial parks could not in terms of investment and revenue. Investors operating inside SEZs are entitled to keep 100 percent of the forex they generate, as opposed to 70 percent for investors elsewhere.