Ethiopia’s Path to Financial Inclusion: Leveraging Digital Banking
Ethiopia has long been an outlier in the region when it comes to financial inclusion. While neighbouring countries embraced mobile money and digital banking, Ethiopia kept to its more traditional route. Yet the last decade has seen the nation begin to reroute, slowly but surely, from exclusion to inclusion, from cash to digital, and from isolation to innovation.
To understand Ethiopia’s impressive financial evolution, we must first acknowledge its starting point. For many years, limited banking infrastructure, exclusive policies, and a very-rural population challenged financial accessibility. In 2014, just about one in five Ethiopian adults had a bank account – the figure had more than doubled by 2022. This alone is a significant achievement, especially in light of the nation’s relatively vast geography and large population.
Still, the most telling story is not just how far Ethiopia has come, but how it’s continuing to move forward.
Banks and Beyond: The Evolution of Account Ownership
The Global Findex Database shows that 46% of Ethiopians are now formally financially included, representing a 7% growth since 2014 and 18% since 2011. However, this growth, while commendable, masks some glaring disparities. Women, for instance, are still 16 percentage points less likely than men to own an account. Adults in the poorest 40% of households are 20 percentage points behind their wealthier counterparts, and, for those with only a primary school education or less, the account ownership gap stands at a staggering 41 percentage points.
Clearly there’s still some way to go, but at any rate the expansion of account ownership signals a profound shift in financial norms. In a country where physical distance and trust have long been barriers, the growing visibility of financial services is progress, whose thanks goes to policy change, technological rollouts, and a general growing hunger for new ways to manage and move money among Ethiopians.
A Regulatory Pivot: Opening the Financial Gates
The Ethiopian government has been intentional in modernizing the country’s financial sector. For example, its introduction of the Banking Business Proclamation in 2024 permitted foreign banks to enter the market. This was a watershed moment: the introduction of international players should not only increase the variety of available services to customers but also inject much-needed capital and expertise. Their entry is likely to encourage competitive pricing, improve service delivery, and perhaps most importantly, catalyse the development of more tailored, user-friendly products for underserved groups. In a country where credit access and account ownership is limited, this competitive pressure could be transformative.
Ethiopia Catches Up
If banking liberalization represents a top-down shift, the digital finance boom is grassroots revolution. Indeed, Ethiopia was late to the mobile money game, but its recent progress is making up for lost time. Telebirr, launched by Ethio Telecom, boasted over 111,000 agents with a 20% weekly activity rate in its launch year. Mobile money agents grew by 200% in the next year, reaching over 200,000. Granted, Kenya's 300,000 active agents still outpace Ethiopia's, but it is key to recognise that Kenya had a head start of more than a decade. Ethiopia's uptake may be slower, but it's definitely happening, and happening impressively fast.
More importantly, digital finance is beginning to close the distance gap. 77% of Ethiopians live in rural areas – physical bank branches were never going to cut it. Mobile money services, on the other hand, meet users where they are. That’s why mobile money services like Telebirr have been so transformational: they circumvent the need for costly infrastructure by leveraging all-but-ubiquitous mobile phone access. By 2024, basic mobile network coverage had reached 85%– solid enough ground for nationwide digital financial services.
For rural populations, the implications are particularly profound. Mobile money allows smallholder farmers to receive payments without traveling long distances, families to receive domestic remittances instantly, women to have greater control over their own finances and accounts. In fact, according to a 2022 UNCDF study, rural users in Ethiopia who adopted mobile money were more likely to save regularly and reported lower reliance on informal credit mechanisms such as moneylenders or rotating savings groups. In areas where banking services were virtually non-existent, digital finance offers an alternative: immediacy, security, and agency.
The Path Forward
Unfortunately, progress is not necessarily equally felt. The gender gap in financial access has persisted, widened even – in six years, the gap grew from 10 to 21 percentage points. Women – and especially those in rural areas or with limited mobility – suffer layered exclusion, with limited phone ownership and more social restrictions on travel. Another significant barrier is low digital literacy, especially affecting rural groups. Even when people have access to mobile phones, many users face challenges navigating key aspects of these platforms, such as PIN security and transaction fees (for example, junk fees cause a lack of trust). This means that the change from cash to digital is technological, indeed, but also deeply cognitive and cultural. Lack of confidence leads to fears of losing money or falling victim to fraud: many rural Ethiopians cited lack of trust or understanding as a key reason for not using mobile money, even with phones in hand and services in reach.
Recognizing these challenges, Ethiopia’s ambitious National Financial Inclusion Strategy (NFIS) 2021-2025, places strong emphasis on improving financial access and capabilities. A key pillar of the NFIS is financial and digital education, and it includes targeted interventions for rural communities. For example, it includes school-based programs, community training via cooperatives and extension agents, and public-private partnerships that use local radio and mobile messaging campaigns to build awareness. Importantly, the NFIS doesn’t treat infrastructure and education as separate tracks – it acknowledges that to scale digital finance in rural Ethiopia, access must go hand-in-hand with understanding.
The next phase of financial inclusion is about active usage. It’s not enough that people open accounts: they need to save and borrow, transfer and transact – they need to use them. One of the most effective ways to transition from access to usage is through the National Digital Payments Strategy (NDPS), which provides the critical infrastructure and policy support needed to embed finance into daily life. While the first phase of the NDPS (2021-2024) focused on building an inclusive and secure payment ecosystem, its second phase (2025-2029) will focus on deepening adoption. It promotes full interoperability between financial service providers, expands merchant acceptance points, and integrates existing digital ID systems. In doing so, the NDPS removes the friction that prevents the prevented (especially women, rural communities and small business) from engaging with digital tools beyond initially creating an account. Being able to send or receive payments across any provider or make digital payments at local shops makes it much more likely that users will keep funding their accounts instead of simply cashing out. These well-considered shifts, coupled with target outreach, create the incubatory conditions for digital financial services to become useful – necessary, lest the notion risks becoming a one hit wonder: briefly exciting and widely celebrated, but inevitably forgotten.
Conclusion
Ethiopia’s financial inclusion journey is far from complete, but its direction is clear. From a late start, the country has built momentum, driven by deliberate policy, expanding infrastructure, and a growing population eager to engage. The task now is to turn this momentum into meaningful, widespread uses, so that access to financial services translates into true financial empowerment. This looks like designing services that people trust, understand, and will actually use. It looks like moving beyond urban centres and digital elites to reach those who have historically been left out, toward rural farmers, informal traders, and unbanked women. For Ethiopia, success will depend on creating tools that reflect the realities of real people: the rural woman with a basic phone, the gig worker with irregular income, the youth seeking financial independence. The next phase of inclusion isn’t just about scale - it’s about usage, relevance, and trust.
Ethiopia has a unique advantage: the benefit of hindsight. It doesn’t need to follow the exact path of Kenya or Tanzania to succeed. Instead, it can learn from their experiences and build a model that blends the best of bank-led security with the telecom-led accessibility. Rather than replicating past successes, Ethiopia has the chance to define its own path, where digital finance becomes a lasting platform for economic resilience, equity, and growth - not just a fleeting convenience. The road ahead will require patience, persistence, and, above all, people-centred design. Financial inclusion, after all, is not just about systems; it’s about improving lives and creating a future where all Ethiopians can fully participate in the digital economy.
