Ethio Lease, the sole foreign-owned financial services firm in Ethiopia, is withdrawing from the country due to severe foreign exchange constraints. This departure marks a significant setback for Prime Minister Abiy Ahmed’s efforts to attract international investors to Ethiopia, the largest economy in East Africa.
Ethio Lease, a division of New York-based African Asset Finance Company, was the first foreign group to secure a financial services license in Ethiopia and has been instrumental in leasing imported equipment such as farm machinery and medical products. The company was established in 2019 as part of economic liberalization reforms, many of which were disrupted by the conflict in Tigray that began in late 2020.
The company has provided over $25 million in leases since its inception and estimated the local leasing market’s potential to exceed $1 billion. However, challenges began in 2021 when the National Bank of Ethiopia mandated that all lease agreements be settled in Ethiopian birr, whose value has significantly depreciated since Ethio Lease’s start. Previously, the company had priced its leases in foreign currency, mitigating the impact of Ethiopia’s foreign exchange shortage.
Frans Vanschaik, CEO of African Asset Finance Company, expressed disappointment, stating that attempts to address the issue with Ethiopian officials were unsuccessful. The company is now seeking arbitration in The Hague for compensation.
Ethiopia’s government, aiming to revitalize foreign investment post-Tigray conflict, faces additional challenges. The war led to a withdrawal of foreign aid and the loss of tariff-free access to U.S. markets, exacerbating the foreign exchange crisis. The Ethiopian government plans to sell state assets, including a stake in Ethio Telecom, to raise funds. In 2021, the sale of a telecom license to a consortium led by Kenya’s Safaricom generated $850 million.
Finance Minister Ahmed Shide has pledged to address foreign exchange system issues and open the banking sector to international players to attract investment.
