Ethiopia’s Financial Landscape: Addressing Disparities and Structural Challenges

Ethiopia’s financial sector has experienced remarkable expansion, yet it faces challenges that could impact its future stability and fair progress. In a recent parliamentary address, Prime Minister Abiy Ahmed underscored the condition of the nation’s banking and finance sectors. He noted that Ethiopia is home to over 100 financial entities, including 31 commercial banks and various other institutions.

The commercial banks have notably grown at an average rate of 20% in the last five years, extending loans totaling approximately 547 billion birr to 450,000 beneficiaries, indicating a flourishing industry.

However, the allocation of loans is uneven, favoring a select group despite Ethiopia’s population of over 120 million. Wealthy individuals can easily obtain multi-billion birr loans, whereas the average citizen faces hurdles in securing even minimal credit.

The Prime Minister concluded by recognizing the concentration of wealth among a few, while the vast majority linger at the lower economic spectrum. This disparity has led to skewed living standards and income inequality. The practice of informal dealings with banks for wealth accumulation poses a threat to the nation’s economic sustainability and needs to be rectified.