Private financial institutions are reevaluating their loan interest rates in response to a significant policy change by the Commercial Bank of Ethiopia (CBE), the largest state-owned bank in the country.

This shift follows CBE’s announcement last week of a major overhaul of its lending rates, marking the first adjustment in four years.

Effective March 7, CBE raised its loan interest rates due to increasing costs associated with fund mobilization and the need to enhance competitiveness within the financial sector.

The new rates, which range from 11% to 18%, have increased from the previous 7% to 17% and apply to nearly all loan categories, with the exception of agriculture and government-backed housing programs, such as the 40/60 and 20/80 condo initiatives.

In its statement, CBE noted that this adjustment aligns with the government’s broader strategy to promote economic competition, grounded in the principles of supply and demand.

The bank also expressed its commitment to introducing innovative strategies and new loan products to strengthen its competitive position.

However, CBE acknowledged that despite ongoing efforts to reduce operational costs, the high expense of attracting deposits remains a major barrier to profitability.

CBE’s decision has prompted private banks to reassess their own interest rate structures.

Industry experts indicated that while CBE’s lending rates have historically set the benchmark for private banks, recent trends have seen these institutions taking the initiative in rate adjustments.

In recent weeks, several private banks have raised their interest rates, which now average between 8% and 23%.

Analysts anticipate that private banks will likely make further adjustments, particularly to their minimum rates, to maintain profitability in an increasingly competitive market.

A senior executive at a private bank remarked, “CBE’s rates play a pivotal role in shaping the market,” highlighting the policy bank’s influence on the financial sector.

A banking expert from one of the private institutions confirmed that other banks are also reassessing their rates in light of CBE’s decision, stating,

“I have learned that several banks are revisiting their interest rates following the policy bank’s latest move.”

These interest rate adjustments reflect the broader challenges facing Ethiopia’s financial sector, including rising costs of deposit mobilization and the delicate balance between profitability and competitive lending practices.

As Africa experiences rapid economic change, entrepreneurship and innovation are critical to driving sustainable growth. During the African Union Heads of State Summit, Amadou Hott, former Minister of Economy, Planning, and Cooperation of Senegal and candidate for the African Development Bank (AfDB) presidency, met with Ethiopia’s leading entrepreneurs. Innovators who are redefining industries, creating jobs, and contributing to inclusive development.

In 2024, global venture capital (VC) funding experienced significant shifts across various regions. North America remained dominant, accounting for 61% of global funding with US$ 41 billion invested in 2024. Asia secured US$13 billion, while Europe reached nearly US$16 billion. In stark contrast, Africa’s VC funding remains the smallest among all regions and has faced a sharp decline. The continent’s total VC funding dropped to just US$2 billion in 2024, a 25% decrease from 2023 and a 53% drop from its peak in 2022.

Ethiopia’s venture capital landscape is however gradually developing with several initiatives aimed at fostering growth in its startup ecosystem. In 2024, Ethiopia launched weVenture, its first VC-backed incubator, focused on scaling early-stage startups in sectors like fintech, health, and agriculture. Additionally, the country introduced the $100 million Enterprise Financing Facility (EFF), which seeks to improve access to capital for small and medium-sized enterprises (SMEs). Ethiopia is emerging as an important player in Africa’s entrepreneurial landscape. Local startups are using technology and innovative solutions to address the continent’s challenges.

In his discussions with the entrepreneurs in Ethiopia, Hott met with influential entrepreneurs such as Abrhame Endrias CEO of Lersha App, a digital platform transforming the agricultural sector by providing smallholder farmers with access to mechanized farming services, quality inputs, and advisory support, Vince Mountaga Diop, CEO of BelCash Technology Solutions PLC, a fintech company driving financial inclusion through digital banking solutions, enabling individuals and businesses to seamlessly access mobile banking and payment services, Amadou አማዱ Daffe CEO of Gebeya Inc., a talent marketplace and EdTech platform that connects African tech professionals with global job opportunities, helping to bridge the skills gap in the digital economy and Samrawit Fikru CEO of  RIDE Ethiopia, a pioneering ride-hailing service that provides safe, reliable, and affordable transportation while creating economic opportunities for drivers. These innovators are building successful businesses and reshaping Africa’s economic landscape through digital solutions that enhance financial access, transportation, agriculture, and commerce.

A strong advocate for youth entrepreneurship stressed the need for better policies, tools, and support systems to unlock Africa’s entrepreneurial potential. “The time for action is now,” he said. “Africa’s future will be shaped by those who dare to innovate and build.” His visit underscored the importance of public-private collaboration in creating an environment where African entrepreneurs can thrive, scale, and attract investment.

As Hott’s candidacy for the AfDB presidency progresses, his mission remains clear: to promote infrastructure development, financial inclusion, and regional economic integration. His discussions with Ethiopian entrepreneurs reflect a shared vision for Africa; self-sufficient, globally competitive, and powered by its innovators. Focusing on digital transformation, strategic partnerships, and youth empowerment, Hott aims to nurture the next generation of African entrepreneurs, driving sustainable growth from within.