Beyond Bank Accounts: Ethiopia’s Push for Inclusive and Deep Financial Engagement

Ethiopia has made notable progress in expanding financial inclusion, nearly doubling account ownership since 2016, yet significant gender, rural, and digital divides persist. The World Bank report urges targeted efforts in digital access, financial literacy, and inclusive service delivery to bridge these gaps.

A recent collaborative report by the World Bank, the Ethiopian Statistical Service (ESS), and the Living Standards Measurement Study (LSMS), supported financially by the Bill and Melinda Gates Foundation, has offered a rich and nuanced portrait of Ethiopia’s progress toward financial inclusion. The study explores how access to formal financial services has evolved, who is gaining ground, and which communities are still being left behind. It aligns closely with Ethiopia’s Home-Grown Economic Reform Agenda (HGERA) and the updated National Financial Inclusion Strategy (NFIS-II), which place inclusive finance at the heart of sustainable development.

Gains in Access, But Equity Remains a Challenge

Between 2016 and 2022, Ethiopia nearly doubled its share of adults with formal financial accounts, increasing from 23 percent to 41 percent. This growth outpaced regional and global comparators, averaging a 35 percent rise every three years, compared to 27 percent for Sub-Saharan Africa. Yet, in spite of these gains, Ethiopia remains one of the region’s lowest performers in terms of financial inclusion. The national average still falls 14 percentage points behind the Sub-Saharan African mean. And beyond the numbers, the gains are skewed. Rural residents, women, and adults with little or no education continue to face significant barriers. In 2022, more than half of men had financial accounts, but only 30 percent of women did. The disparity is even more pronounced when educational attainment is considered: while 94 percent of those with education beyond secondary level held accounts, just 25 percent of those with no education were financially included.

The Gender Gap: Persistent and Growing

One of the most striking findings of the report is the growing gender gap in financial inclusion. Between 2016 and 2022, this gap more than doubled, from 10 to 21 percentage points. In rural areas, it expanded to 23 points, compared to a steady 15-point gap in urban zones. Decomposition analysis shows that nearly 88 percent of this disparity can be attributed to differences in observable characteristics such as education, employment status, digital access, and financial knowledge. Financial awareness alone accounted for over 65 percent of the gender gap in 2022. The digital divide is equally concerning: only 15 percent of adult women owned mobile phones in 2022, compared to 41 percent of men. Mobile phones are a primary gateway to digital financial services, making this disparity a critical bottleneck for inclusive financial development. Furthermore, women remain disproportionately affected by poor financial literacy, which limits their ability to engage meaningfully with the formal financial system.

Digital Tools and Services: A Promising but Underused Frontier

Despite the promise of mobile money and digital financial platforms, actual usage among Ethiopians remains limited. While TeleBirr and M-PESA have made significant inroads, TeleBirr reported over 41 million subscribers by the end of 2023, digital financial services are not yet a routine part of everyday transactions. Less than 10 percent of account holders use digital payments regularly. Instead, cash remains dominant: 84 percent of government assistance, 60 percent of wage payments, and 61 percent of remittances continue to be paid in cash. Banking agents, another tool designed to improve financial outreach, particularly in rural areas, are also underperforming. Though their numbers have increased significantly, just 2 percent of those who joined the financial system between 2019 and 2022 did so via agents. Most new entrants still rely on traditional banking institutions, 65 percent through public banks and 33 percent through private ones.

Deepening Inclusion: From Ownership to Usage

Ownership of a financial account is just the first step. The report emphasizes that true financial inclusion means engaging with a broader suite of services, savings, credit, insurance, and digital tools. While savings in formal institutions rose modestly from 18 percent in 2016 to 24 percent in 2022, borrowing has remained stagnant. Only 3 percent of adults accessed loans from formal financial institutions during this period, a clear indication that many barriers remain in place. Interestingly, while about 20 percent of unbanked adults moved into the financial system between 2019 and 2022, a striking 82 percent of them still operate at a low level of financial inclusion, using perhaps just one product or service, most commonly a savings account. Even among the persistently banked population, only 41 percent had progressed beyond basic engagement by 2022.

The report concludes that Ethiopia’s financial inclusion journey is at a crossroads. While the policy environment is robust and the potential for digital innovation is immense, structural and cultural barriers persist. Financial literacy must be scaled up, especially for women and rural communities. Mobile phone penetration and usage must be enhanced through affordability and infrastructure policies. Digital payment systems need to be better integrated into everyday economic activities. The country has the building blocks for inclusive finance; the challenge now is to build systems that are not only accessible but also usable and empowering for all. With targeted and sustained policy efforts, Ethiopia can move from progress in numbers to real, transformative financial inclusion.