Several initiatives to form commercial banks are on the verge of giving up their ambition to enter the industry, while others are weighing options elsewhere in the financial sector.

Dreams of forming banks are cut short after the central bank increased the minimum founding capital threshold to five billion Birr last April. Regulators at the National Bank of Ethiopia (NBE) had given promoters of banks a six-month window to be incorporated with half a billion Birr capital, following the 10-fold jump in the minimum threshold. Two dozen banks in the process of incorporation were also required to increase capital to five billion Birr in seven years, with banks in business given five years to meet the requirements.

Only two interest-free banks (ZamZam and Hijra), a mortgage bank under the brand Goh Betoch Bank, Gadaa and Ramis banks joined the industry after raising half a billion Birr in equity before the deadline last November.

The challenge proved too difficult for others on the way, who pleaded with the central bank for an extension. Regulators at the NBE declined. Among those between a rock and a hard place is Afro Bank, which started floating equity to the public last January. It had offered 750,000 shares with a par value of 1,000 Br. Its promoters say they had raised a subscribed capital of around 200 million Br from 54 shareholders. However, raising five billion Birr remains a dream.

They want to persuade shareholders to consider other investment alternatives, according to Kassahun Haile, one of the promoters of Afro Bank.

Time to raise the five billion Birr is not on their side, according to Kassahun. It would be too long a wait for shareholders looking to recoup their investment. The equity is kept in non-interest bearing accounts, and the Bank would lose out to inflation and currency depreciation.

"This is one of the things we asked the central bank to reconsider," said Kassahun.

Yinager Dessie (PhD), governor of the central bank, held discussions with the promoters a few months ago.

“Many of them have informed us they've dropped the sale of shares," Frezer Ayalew, director of banking supervision at the NBE, told Fortune.

This entails notifying the central bank and returning equity raised to shareholders.

The promoters of Akufada Bank, another initiative unable to meet the threshold, seem to have found a resolution. Its shareholders have agreed to divert equity to a microfinance institution (MFI) dubbed Akufada Microfinance. It was incorporated last year with 10 million Br in capital, according to Robel Nigusse, project manager at Akufada.

Financial experts say shifting towards establishing a microfinance or fintech company is viable. Incorporating as an MFI has its own incentives, according to Kinfemichel Yibkaw, an expert who has worked in the microfinance industry for over a decade.

Forty-one microfinance institutions serve five million clients, most of whom live in rural areas.

Other promoters have been consulting with the central bank about their options, according to Frezer.