Note: The data are provided for informational purposes only and in some cases, the information may be incomplete, not fully accurate or out of date. For more information on how data are compiled, see "A Note About Sources." The date of the last update for each country is marked in the section "Country Indicators." We welcome updates and comments. Click here to write to us.
Ethiopia
Country Indicators
Information Last Updated
February 2008
Information Compiled by
Jeremiah Grossman, IRIS Center
Population (Millions)
71.3 [2005]
Population Density (per sq km)
71 [2005]
GNI per capita (US$)
160 [2005]
GNI per capita (PPP US$)
1000 [2005]
Total Unemployment (% of labor force)
8 [2000]
Employment in Agriculture (% of total employment)
78 [2000]
Gross domestic saving (% of GDP)
4 [2005]
% Population under $2/day (PPP)
78 [2000]
Depth of Financial Sector (M2/GDP)
45 [2005]
Exchange rate
1 USD : 9.35 ETB, as of 15 February 2008
Percentage of population with access to banking services
Over 2/3 of Ethiopians have access to INFORMAL financial services, but access to FORMAL services is much lower (Ethiopia MF Country Scan, MicroNed).
Capitalization of banks, NBFIs, stock market
STOCK MARKET: There is no stock market in Ethiopia. However, the private sale of equity in companies is common (Economic Freedom -- Ethiopia, Heritage).
Ownership structure of banks (and financial institutions if available)
BANKS (as of June 2007): Of the 10 commercial banks, 8 are privately-owned and 2 (Commercial Bank of Ethiopia [CBE]; Construction & Business Bank) are state-owned. The one development bank (Development Bank of Ethiopia) is state-owned. CBE has 40% of total branches, while the private-sector banks account for another 47% of total branches. Public-sector banks still hold approx. 68.5% of total capital, but this is down from approx. 75% in FY 2002/2003. MICROFINANCE INSTITUTIONS (MFIs) (as of June 2007): 28, of which 4 predominate (Amhara Credit & Savings Institution; Dedebit Credit & Savings Institution; Oromia Credit & Saving S.C.; Omo Credit & Savings Institution). These four institutions mobilized approx. 86% of total sector deposits, accounted for approx. 84% of sector assets and loan portfolio, and owned about 81% of total sector capital. INSURANCE COMPANIES (as of June 2007): 9, 1 of which is state-owned (Ethiopian Insurance Company [EIC]). The EIC accounts for 25% of total branches and 41% of total capital in the insurance industry (Quarterly Report 4th Quarter FY 2006/07, SBP, Section 4.4).
Formal and Semi-Formal Sources of Microfinance
Commercial banks; development banks; microfinance institutions (MFIs)
Moneylenders, friends and relatives, iddir (burial assistance organizations), and iqqub (savings and credit associations). According to a 2004-05 survey of users of informal finance services in four regions, 48% borrow from moneylenders, 35% from friends or relatives, 15% from iddir, 2% from iqqub, and 10% from multiple informal sources (Ethiopia MF Country Scan, MicroNed).
Wholesale Lender(s)
1) RURAL FINANCIAL INTERMEDIATION PROGRAM (RUFIP): A USD 80 million (748 million ETB) fund supported by the International Fund for Agricultural Development (IFAD), the African Development Bank (AfDB), and the World Bank. RUFIP funds capacity building and offers low-cost capital for MFIs, among other initiatives. 2) Various nonprofit, bilateral, and multilateral donor initiatives. 3) Banks have excess liquidity and could be a good source of wholesale funds, but so far the banks have been uncomfortable with lending to MFIs without requiring full security (Ethiopia MF Country Scan, MicroNed).
Definitions of microfinance or microcredit
MICROCREDIT: Provision of credit -- whether in cash or in kind -- to rural and urban poor, with preference given to marginal farmers and very small loans. For small institutions with less than USD 107 thousand (ETB 1,000,000) in deposits, loan ceiling of USD 530 (ETB 5,000) and repayment term of 24 months or less apply. For institutions with at least USD 107 thousand (ETB 1,000,000) in deposits, part of the loan portfolio (equivalent in value to 20% of total loan disbursement in the previous year) may consist of loans that exceed the loan ceiling, and repayment of such loans may extend to up to 5 years (MFIs Proclamation, Section 2(3-4)) (MFI Directives, NBE, Directive No. MFI/17/2002).
NGO microfinance provider formalization or transformation issues
The regulations on MFIs mandate that all NGOs providing microfinance convert into licensed MFIs. While domestic NGOs have all converted, as of mid-2007, some international NGOs were continuing to provide microfinance services as part of their overall development services, although this is not permitted by law (Ethiopia MF Country Scan, MicroNed).
Ongoing microfinance policy development status
Taxation of MFIs continues to be a controversial issue. The Ministry of Finance has not clarified the tax rules for MFI activities. As of May 2007, MFIs had not paid any taxes on their activities, but the Ministry was requesting some MFIs to pay income tax on their savings and profits (Ethiopia MF Country Scan, MicroNed).
Safety net availability: insurance, pension, etc.
Old-age, disability, work injury, and survivor benefits for public-sector employees only; employee sick leave and maternity leave (Social Security in Ethiopia, SSA).
1) TOTAL ASSETS (as of June 2007): USD 372 million (ETB 3,480,000,000).
2) TOTAL CAPITAL (as of June 2007): USD 104.7 million (ETB 979,265,000).
3) TOTAL OUTSTANDING LOANS (as of June 2007): USD 293 million (ETB 2,740,000,000). (Quarterly Report 4th Quarter FY 2006/07, SBP, Section 4.4).
Most SACCOs are located in urban areas and are composed primarily of salaried employees who live within the localities in which the SACCOs are located (MF Study: Ethiopia, SIDA)
General Approach to Regulating
Legal basis for regulating
Definition or description of institution
Regulator(s) and role of regulator(s)
Activity that determines required regulatory status
A private or public company providing a broad range of financial services to the commercial sector and the general public.
NBE & Ministry of Finance
Provision of any permitted financial services in the form of a share-holding company that is subject to stringent prudential regulatory and supervisory requirements.
A company licensed to extend small-value credit (in cash or in kind) to rural farmers and urban microentrepreneurs (MFIs Proclamation, Sections 2-3).
NBE, Ministry of Finance. NBE provides licensing requirements and also is tasked with promoting the microfinance industry by training MFIs, promoting investment, and encouraging banks to engage in microfinance.
A cooperative society is established by individuals on a voluntary basis to address these individuals' economic and social needs. Such a society should operate by democratic management principles. Savings and credit cooperative societies focus chiefly on the development and promotion of savings and credit services for members (Cooperative Societies Proclamation, Sections 2(1-2), 4(7)).
Licensing and Supervision of the Business of Micro-financing Institutions Proclamation No. 40/1996; Licensing and Supervision of the Business of Micro-financing Institutions Directive No. MFI/01/96 (Minimum Paid Up Capital and Information Required from Applicants)
Cooperative societies operate for the benefit of their members, each of which is entitled to one vote, regardless of shareholdings. If raising capital from outside sources, cooperatives must ensure that they maintain their autonomy and democratic control over the organization (Cooperative Societies Proclamation, Section 5).
CEO: Min. bachelor's degree or equivalent in relevant studies; min. 10 years' senior managerial experience in a financial or related institution; min. 35 years of age; preferably married or head of household. BOARD OF DIRECTORS: Min. high school education with ability to read financial and other technical reports; managerial experience in business and/or similar organizations; min. 30 years of age. (Banking Directives, NBE, Directive SBB/1/94, Sections 4-5).
FOUNDERS, DIRECTORS, AND CEO: Must submit CVs with: name; age; marital status; education; previous ten years' employment history; business/financial experience; leadership positions; and involvement in civic, social, and charitable activities. SIGNIFICANT (>10%) SHAREHOLDERS: Names, nationality, number and value of shares held (Banking Directives, NBE, Directive SBB/1/94, Section 3).
MANAGERS: Except with NBE approval, the following may not manage MFIs: persons who have been declared bankrupt or are in default to creditors; and persons who have been convicted of an offense of fraud or breach of trust (MFIs Proclamation, Section 18). CEO: Min. bachelor's degree in social science or equivalent field; min. 3 years' senior managerial experience in a financial or related institution; min. 30 years of age; preferably married or head of household (MFI Directives, NBE, Directive No. MFI/02/1996). BOARD OF DIRECTORS: Min. high school education with ability to read financial and other technical reports; preference for managerial experience in business and/or similar organizations; min. 25 years of age (MFI Directives, NBE, Directive No. MFI/02/1996).
1. Work plan required that includes: (i) Business plan covering mobilization and channeling of funds, and the steps to be undertaken to carry out plan; (ii) overview of economic conditions in proposed area of operation; (iii) balance sheet, income statement, and monthly cash flow projections for 12 months following commencement of business (MFI Directives, NBE, Directive No. MFI/01/96, Section 3).
FOUNDERS, DIRECTORS, AND CEO: Must submit the following information: name; nationality; address; age (Directors and CEO only); and shareholdings. PROPOSED OFFICERS/DIRECTORS: Must submit CV with the following information: age; marital status; education; employment history; finance-related experience; involvement and leadership roles in civic, social, and charitable activities (MFI Directives, NBE, Directive No. MFI/01/96, Section 3 & Application Form).
No direct foreign aid or investment. Instead, done through sponsorship of members, etc.
Cooperatives/Credit Unions
Savings and Credit Cooperative Societies
MEMBERS: Min. 14 years of age; must be able and willing to pay share capital and registration fees, and must fulfill all societal obligations (Cooperative Societies Proclamation, Section 13). MANAGEMENT COMMITTEE AND CONTROL COMMITTEE: Limited to max. two consecutive three-year terms. No other qualification requirements (Cooperative Societies Proclamation, Sections 23, 25).
Must provide name, address, and signature of (i) all members; and (ii) all members of the management committee. Must also prove how all members have met the requirements for membership (Cooperative Societies Proclamation, Section 9(2)).
Bylaws must include the following information (inter alia): (i) powers, responsibilities, and duties of management bodies; (ii) conditions for withdrawal/dismissal of members; (iii) conditions for appointment, reelection, and termination of members of management bodies; (iv) rules re: meetings; (v) rules re: allocation and distribution of profits; (vi) auditing procedures; and (vii) rules re: employment (Cooperative Societies Proclamation, Section 11).
CAPITAL: Includes issued and fully paid-in shares, legal reserves, and other reserves approved by the NBE. IN-KIND CAPITAL CONTRIBUTIONS: Under certain conditions, items such as vaults, buildings, and essential vehicles can be counted towards paid-up capital. However, in-kind capital contributions may not be considered for meeting minimum capital requirements and may only comprise 25% of the paid-up capital that exceeds the minimum capital. (Banking Directives, NBE, Directive No. SBB/9/95, Section 2; Directive No. SBB/3/95).
PASS (0-29 days overdue or full secured by cash collateral or cash substitutes): 1%. SPECIAL MENTION (30-89 days overdue): 3%. SUBSTANDARD (90-179 days overdue or most renegotiated loans): 20%. DOUBTFUL (180-359 days overdue): 50%. LOSS (360 or more days overdue): 100%. Provisions for loans secured by physical collateral may be reduced by the net recoverable value of the collateral (Banking Directives, NBE, Directive SBB/32/2002, Sections 6-7).
LEGAL RESERVE: 25% of annual net profit until Legal Reserve Account equals bank's capital, at which point only 10% of annual net profit must be transferred to Legal Reserve Account. DEPOSITARY RESERVE: Must maintain account at NBE with value equivalent to at least 5% of total domestic and foreign deposit liabilities. LIQUIDITY REQUIREMENTS: Must maintain liquid assets equivalent to min. 15% (min. 5% primary reserve assets, and the remainder as secondary reserve assets) of short-term liabilities (Banking Directives, NBE, Directive No. SBB/4/95; SBB/15/96; SBB/37/2004).
CAPITAL: Includes paid-up capital; donated capital; retained earnings; other free reserves. IN-KIND CAPITAL CONTRIBUTIONS: Under certain conditions, items such as vaults, buildings, and essential vehicles can be counted towards paid-up capital. However, in-kind capital contributions may not be considered for meeting minimum capital requirements and may only comprise 10% of the paid-up capital that exceeds the minimum capital (MFI Directives, NBE, Directive No. MFI/02/96; Directive No. MFI/16/2002).
0%: Cash on hand; deposits with NBE; prepayments; claims on federal government; loans/advances fully secured by cash, federal government securities, or securities guaranteed by federal government. 20%: Deposits with all other banks; claims on regional government; loans/advances fully secured or guaranteed by regional government. 100%: Receivables; all other loans/advances; investments; fixed assets (net of depreciation). NOTE: Risk-weighting rules apply only to MFIs with at least USD 107 thousand (ETB 1,000,000) in deposits. (MFI Directives, NBE, Directive No. MFI/16/2002).
FOR MFIs WITH LESS THAN USD 107 thousand (ETB 1,000,000) IN DEPOSITS: DOUBTFUL (Overdue 6-12 months): 50%. LOSS (OVERDUE more than 12 months): 100% (MFI Directives, NBE, Directive No. MFI/04/96). FOR MFIs WITH (ETB 1,000,000) OR MORE IN DEPOSITS: SUBSTANDARD (Overdue 91-180 days): 25%. DOUBTFUL (Overdue 181-365 days): 50%. LOSS (Overdue more than 365 days): 100%. Provisions for loans secured by deposits held as security may be reduced by the amount of the deposit (MFI Directives, NBE, Directive No. MFI/17/2002, Section 5).
LIQUIDITY REQUIREMENTS (ONLY FOR MFIs WITH TOTAL DEPOSITS OF USD 107 thousand (ETB 1,000,000) OR MORE): Must maintain liquid assets equivalent to min. 20% of total deposits (MFI Directives, NBE, Directive No. MFI/15/2002).
OPENING BRANCHES: NBE approval required. Must submit application along with feasibility study. NBE will respond within 30 calendar days. (Banking Directives, NBE, Directive SBB/22/96)
LOANS/CREDIT FACILITIES TO INDIVIDUAL OR RELATED GROUP: Max. 25% of bank's total capital, unless the loan is fully secured by cash collateral or cash substitutes. INVESTMENT IN INSURANCE & NON-BANKING BUSINESS: Banks may own up to 20% of an insurance co., provided that the cost does not exceed 10% of the bank's net worth INVESTMENT IN REAL ESTATE: Max. 20% of net worth may be invested (excluding business premises) without NBE approval. INVESTMENT IN NON-GOVERNMENT SECURITIES: Max. 10% of net worth. TOTAL INVESTMENTS: Max. 50% of net worth (excluding investment in government securities). (Banking Directives, NBE, Directive SBB/12/1996; SBB/29/2002).
1. Banks need prior NBE approval to offer loans or other credit facilities exceeding USD 3,000 (ETB 30,000) in the aggregate to: (i) individual directors; or to (ii) people whose credit facilities are guaranteed by directors. 2. LOANS TO RELATED PARTIES: Max. aggregate loans to related parties may not exceed: (i) 15% of total capital (for one related party); or (ii) 35% of total capital (for all related parties). Loans fully secured by cash collateral or cash substitutes are exempted. All loans to related parties must carry the same terms as the terms to unrelated parties. (Banking Directives, NBE, Directive SBB/10/95; SBB/30/2002).
Non-bank Financial Institutions
Microfinance Institutions
PERMITTED: Small-value credit (cash or in-kind); deposit-taking (savings, time, and demand deposits); drawing/accepting domestic drafts; purchasing securities; providing clients with non-financial technical and support services (MFIs Proclamation, Section 3).
1. OPENING BRANCHES: Must notify NBE within 15 days after opening a branch office (MFIs Proclamation, Section 14) (MFI Directives, NBE, Directive No. MFI/07). 2. CLOSING BRANCHES: Requires NBE approval and at least 3 months' notice to NBE of intention to close branch. (MFI Directives, NBE, Directive No. MFI/07/96). 3. MAY NOT DO ANY OF THE FOLLOWING WITHOUT PRIOR NBE APPROVAL: (i) sell, transfer, or restructure the MFI or its assets; (ii) reduce the MFI's capital; or amend the MFI's name or memorandum of association (MFIs Proclamation, Section 17).
MAX. INDIVIDUAL LOAN SIZE (FOR INSTITUTIONS WITH AT LEAST USD 107 thousand (ETB 1,000,000) IN DEPOSITS): 0.5% of the MFI's total capital. The aggregate value of all loans that exceed USD 535 (ETB 5,000) each may not exceed 20% of total loan disbursements in the previous year (MFI Directives, NBE, Directive No. MFI/17/2002, Section 3). INVESTMENT IN FINANCIAL INSTITUTIONS & AGRICULTURE-RELATED ACTIVITIES: Max. aggregate investment of 10% of institution's equity capital; max. investment in a single company of 3% of institution's net worth. (MFI Directives, NBE, Directive No. MFI/06/96).
Societies may be amalgamated or divided upon passage of a Resolution by the relevant General Assembly, provided that the Registrar of cooperatives is convinced that (i) all members and creditors of the society agree to the amalgamation or division; or (ii) payment has been made or guaranteed to any members and creditors that do not agree (Cooperative Societies Proclamation, Section 12).
Not addressed in the Cooperative Societies Proclamation.
Not addressed in the Cooperative Societies Proclamation.
Loans from members will be subject to rules provided in bylaws. In no event may the interest rate on such loans exceed prevailing bank interest rates (Cooperative Societies Proclamation, Section 34).
Reporting and Supervision
Supervision Method
Supervision costs and fees
Disclosure and reporting requirements
Depositor protection mechanisms (e.g., deposit insurance or lender of last resort)
MFIs are subject to off-site and on-site supervision by the Microfinance Supervision Department of the NBE. On-site supervision -- which is based upon the CAMEL framework -- is limited due to capacity constraints. In FY 2004/05, only 4 of the then-27 MFIs were subject to on-site supervision (MF Regulation & Supervision in Ethiopia, Ebakeh).
REPORTING -- QUARTERLY: Profit and Loss statement, balance sheet (all MFIs); liquidity, capital adequacy (required only for institutions with at least USD 107 thousand (ETB 1,000,000) in deposits). ANNUALLY: Must submit audit report within 6 months after end of financial year. PERIODICALLY: Also must submit reports on (i) credit and savings performance; (ii) unpaid balance of loans and provisions; and (iii) deposit and lending interest rates (frequency of these reports not stated). (MFI Directives, NBE, Directive No. MFI/08/96; Directive No. MFI/13/02; Directive No. MFI/14/02; Directive No. MFI/15/2002; Directive No. MFI/16/2002).
Cooperatives/Credit Unions
Savings and Credit Cooperative Societies
Registrar of cooperative societies shall ensure that each cooperative society is audited at least annually. The regulator may also conduct or order an inspection of a society at any time, including when requested by a majority of the society's executive committee or by at least 1/3 of the society's members (Cooperative Societies Proclamation, Section 37).
Not addressed in the Cooperative Societies Proclamation.
Results of audit and inspection must be kept in the office of the registrar and in the society, and must be easily accessible to the general public (Cooperative Societies Proclamation, Section 38).
Not addressed in the Cooperative Societies Proclamation.
Public-sector employers must contribute 6% (if civilian) or 16% (if military) of payroll for various social security programs for public-sector employees only (Social Security in Ethiopia, SSA).
1. The MFI Proclamation empowers the Ministry of Finance with determining the "period, manner and condition" for exempting MFIs from income tax. However, this has never been clarified. While no MFIs had paid any income taxes (as of May 2007), the Ministry had requested that some MFIs pay income taxes on their savings and profits (MFIs Proclamation, Section 19) (Ethiopia MF Country Scan, MicroNed). 2. Cooperative societies are exempted from income tax. Members, however, must pay income tax on dividends received (Cooperative Societies Proclamation, Section 31(1)(a)).
Other Relevant Business Legislation
Credit Rating and Reporting Requirements: Content Requirements
Credit Rating and Reporting Requirements: Formatting requirements (e.g., CGAP, GAAP, or other international standards)
Security interests: Forms accepted
General Applicability
General Applicability
1. Bank must enter complete borrower profile, including personal information and loan information, into credit bureau ("Credit Information Database") operated by National Bank of Ethiopia (NBE). 2. For all loans or advances of at least (ETB 200,000), banks must request borrower information from the credit bureau prior to extending the loan or advance. Loans or advances to a borrower in default are prohibited. (Banking Directives, NBE, Directive SBB/36/2004).
Requirements include: (i) Bank's profile; (ii) Borrower's profile; (iii) Existing loans and advances; (iv); Collateral; (v) Audited financial statements (if borrower is a company); and (vi) Restructuring of loan/legal measures taken (if applicable) (Banking Directives, NBE, Directive SBB/36/2004).
