Access to Finance in Ethiopia: Sector Assessment Study (Volume 2)

This diagnostic study was developed as a first step in developing a national access to finance strategy in Ethiopia. It identifies challenges and makes recommendations for developing an inclusive financial services sector.Ethiopia has an enabling regulatory framework as well as government and donor support for MFIs. Despite this, the country faces a lack of innovative, demand-driven financial services and sustainable institutions to cater to the huge unmet demand for financial services from poor households, microentrepreneurs and small farmers. However, the development of pro-poor financial services in Ethiopia has shown progress at all levels even with the limited role of international funders and the difficult economic and social environment in the country. To achieve greater outreach by sustainable institutions, stakeholders should build on a number of financial sector strengths. Recommendations at the macro, meso and micro levels include:

• Updating MFI legislation and regulation;
• Strengthening support institutions in numbers, geographical presence and service lines;
• Reducing dependency on donors and government;
• Upgrading training methodologies and tools;
• Increasing savings mobilization and product range;
• Strengthening MFIs' MIS and internal accounting and auditing practices;
• Building relationships with MFIs and insurance companies.