Banking Sector in Ethiopia: Origin and Present State

Abstract

Ethiopia’s formal (regulated and controlled) financial sector comprises banks, insurers, microfinance institutions, and capital goods finance companies. The banking sector in Ethiopia is an integral part of the financial sector in particular and the economy as a whole. Its contribution to the country's macroeconomic stability and growth objectives is evident. This research paper aims to provide insight into the origin and development of the banking sector in Ethiopia, as well as its current structure, regulatory framework, performance, and status quo. The study is entirely based on the review of literature from various secondary sources. The paper concludes that even if the banking sector has witnessed a sea change during the past three decades, its overall achievement lags far behind that of several other Sub-Saharan African countries, the rest of the world, and international standards. However, the paper indicates that there is a huge growth potential for the banking business in Ethiopia.

Credit Risk Determinants in Selected Ethiopian Commercial Banks: A Panel Data Analysis

“…Ethiopia, a developing country in Africa, also experiences similar circumstances. The banking sector plays a crucial role in Ethiopia's economy, and it accounts for around 93 percent of the total capital in the financial sector and contributes 4.2 percent to Ethiopia's national economy (Abate and Kaur 2023). Ethiopian commercial banks have a significant reliance on loans, which account for a substantial portion of their assets, ranging from 50 to 75 percent, and their primary focus is on providing consumer loans as a means to generate revenue and meet the demand for credit.…”