Ethiopia: Inclusion Strategy Incentivizes Financial Outreach

11 January, 2018

Original source:  Making Finance Work For Africa

People in the financial sector expecting the newly unveiled Financial Inclusion Strategy to further facilitate and incentivize financial outreach efforts in the private sector.

Some months ago, Ethiopia, through the National Bank, has launched a National Financial Inclusion Strategy that aims to provide universal financial access through innovative and convenient channels.

The Strategy highlights that the financial sector has expanded considerably and the country has taken great strides to develop an inclusive and modern financial sector, although there is a room for many improvements to allow full financial inclusion and reduce the number of people unbanked and underbanked.

One of the potential benefits the Inclusion Strategy will bring for the banking sector, according to Robel Alemayehu, Director of e-Banking at Dashen Bank SC, is that it will incentivize/encourage the private banking sector to undertake their own financial inclusion effort not only as managing national agenda, but as financial value and profit making mechanism.

Citing Dashen Bank, he states that the Financial Inclusion Strategy allows for the private banking sector to expand financial outreach without incurring cost of setting up physical branches. "One of the main challenges for the banking sector is setting up physical branches, and to that end, we in Dashen Bank are focusing on what we call alternative channels, which concur with the national Inclusion Strategy."

He adds that the Strategy is well prepared in many ways, whether in terms of legal framework, and in giving the banking sector space to maneuver compared to the 2012 Agency Banking Directive. "In preparing the Strategy, which involved the likes of World Bank, IMF, DfID, I think they have come to understood branch based expansion is not effective or feasible."

Financial inclusion is about converting cash-based system to an electronic value system. He continued to say that as Dashen Bank, we have a virtual card initiative - it is basically the buying and selling of goods through mobile phones - and this is one of the financial inclusion project of our bank.

Micro Finance Institutions (MFIs) have an important role in helping deepen financial inclusion, especially in case of developing countries, due to their widespread reach, especially in serving under-served rural areas, low income families.

In regards to this, Serekeberhan Zeray, Deputy General Manager of Addis Credit & Saving S.C, said that as an MFI, they provide different tailor-made loan sizes (financial products) to low income individuals in particular. He adds that as an institution that mainly operates in Addis and some Special Oromia zones, it works to address the rural community from its Addis Ababa branches whilst also providing tailor-made loan types spread in seven sectors, in the shape of micro-loans, small business loans, and short term loans. Read more on All Africa.

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