Ethiopia’s Digital Finance Revolution: What Went Right in the Past Few Years

Consider how different your digital life was just a few years ago. It has undoubtedly undergone significant changes since then. A couple of years back, using your phone to pay for all your utility bills, including fuel, was not commonplace. People generally had less inclination to rely on digital methods for their day-to-day payments.

However, over the past few years, particularly since 2021, remarkable progress has been made in this regard. Not only has there been a substantial increase in user adoption and digital transactions, but there has also been a proliferation of companies engaged in financial services. Although Ethiopia still lags in attaining financial inclusion, especially in rural communities, the progress made in the past few years is worth exploring.

Ethiopia’s Banking Sector Grapples With Historic Liquidity Crisis

Private banks in Ethiopia are now facing severe liquidity and credit management challenges. The NBE stated that poor cash management is the root cause of the liquidity problem, which has led most banks to rely on short-term loans from the central bank via a standing facility window. However, this facility is meant to be used as a last resort to address short-term liquidity issues and is not a viable solution.

Proposed PII Directive Holds Both Promise and Caution for MoMos

The revised directive is a first step toward opening the mobile money sector in Ethiopia to foreign investment. As the revised directive has not yet been tested in practice, it may be necessary to make additional modifications to ensure the success of Mobile money services in Ethiopia.

Developments in InsurTech Market: Innovations, Benefits, and Lessons for Ethiopia

InsurTech, short for Insurance Technology, is a term that refers to the application of technological innovations in the insurance industry. This involves utilizing various technologies such as the Internet of Things (IoT), Blockchain, Big Data, the Internet, Social Media Data, Mobile, Chatbots, Telematics, Biometrics, Artificial Intelligence, and Machine Learning to enhance specific components of the […]

Microfinance Institutions: the Need for Capital  

The National Bank of Ethiopia (NBE) has increased the minimum capital requirements for microfinance firms (MFIs) by over seven folds as of January 16, 2023.

This came as no surprise to existing Microfinance institutions or those under establishment, as the Bank has indicated a capital requirement increase is imminent.

Uncollateralized & Digital Credit in Ethiopia: How Far Has it Come and Where is it Heading?

The last few years have witnessed the rise of a seminal phenomenon in the Ethiopian financial sector that goes back more than a century – digital lending. Although digital credit has immense potential in serving the underfinanced Ethiopian population, there is no lack of impediments holding that potential back.

Among the hurdles are the lack of digitized identification and credit rating systems, a heightened fear of risk due to the absence of efficient risk mitigation methods, and difficulties in loan collection. 

The Long Road to the Fabled National ID

It is a daunting challenge in Ethiopia, where the Kebele ID remains the most used form of identification. The Kebele ID is registered locally without a digital database in many parts of the country. Even though it has high coverage and provides citizens with an official means of authentication, it has many weaknesses that need to be addressed. 

The Kebele ID is not effectively deduplicated and hence, does not ensure that an individual cannot claim multiple identities.