Financial Outreach and Use in Ethiopia

Hussein Jarso, Prabhakara Rao J. Ravi


Access to finance is not the same as use of financial services. This paper looks into the supply side and uses of financial services in Ethiopia. Using the data obtained from National Bank of Ethiopia and individual banks this study evaluated the physical availability of financial services provider in national and regional level, and number of their service users for the Ethiopian fiscal year 2014. Bank branches, insurance companies branches and ATM as a ratio of total area square kilometer and total population used to point out the deposit taking financial institutions and insurance companies geographical and demographic penetration. Number of deposit and loan accounts of banks and microfinance together used as a proxy for number of users of financial services. Despite the various benefit of finance, both supply and usage data showed Ethiopian financial institution concentrated much on urban area. Especially the number of banks and insurance companies’ branches were found in the capital city, which is residential place for only 3.5% of total population of the country, very large. In this city private banks placed 45.56% of their branches, while public owned banks opened only 20.33% of their branches here.  It has been the public owned banks that have the lion share in number of depositors and borrowers, and in amount of deposit and disbursed loan. Moreover, large numbers of insurance companies’ branches were operated in this city than the regional states. The microfinance institution which stands for serving the poor section of the society has accommodated only a few portions of the total poor peoples.

Keywords: Geographic penetration and Demographic penetration, financial inclusion in terms of deposit and loan

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