By Benadeta Mwaura - Reporter
Ethiopia, May 04, 2026 - Ethiopia is preparing a new regulatory framework that will compel banks to allocate a fairer share of credit to key productive sectors, particularly industry, in what signals a deeper shift in the country’s ongoing economic reforms.
Prime Minister Abiy Ahmed said the government is in the process of crafting new bank credit regulations aimed at correcting imbalances in lending, where sectors such as manufacturing have historically struggled to access adequate financing compared to trade and services.
According to Abiy, the move is intended to ensure that industrial development, seen as central to Ethiopia’s long-term economic transformation, receives the financial backing it requires. “A new bank credit regulation is being prepared to ensure that the industry sector receives its fair share of financing,” he stated.
The planned reforms come against the backdrop of broader structural changes in Ethiopia’s financial sector, as the government pushes to transition from a state-led model to a more private sector-driven economy.
Over the years, limited access to credit has been cited as a major bottleneck for manufacturers, with banks often favouring short-term, lower-risk lending to commerce rather than long-term industrial investment.
Abiy acknowledged these distortions, indicating that the new regulation will seek to realign lending priorities in a way that supports production, job creation, and export growth.
The policy is expected to guide how financial institutions distribute credit across sectors, potentially introducing thresholds or incentives to channel more funds into industry.
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The initiative also ties into Ethiopia’s wider economic reform agenda, which includes opening up key sectors such as banking, telecoms, and insurance to competition and foreign investment.
These reforms are aimed at boosting productivity, increasing foreign exchange earnings, and strengthening the country’s industrial base.
Economists have long argued that without directed credit policies or incentives, manufacturing sectors in developing economies often remain underfunded due to their higher risks and longer return periods.
The proposed regulation appears to respond directly to this challenge by repositioning banks as active drivers of industrial growth rather than passive lenders.
While full details of the regulation are yet to be made public, the Prime Minister’s remarks suggest a more interventionist approach in steering credit flows, one that balances market liberalisation with strategic state guidance.
If effectively implemented, the policy could mark a significant turning point for Ethiopia’s industrialisation ambitions, ensuring that access to finance is no longer a limiting factor in the country’s push toward sustained economic expansion.