By significantly elevating Ethiopia’s financial service coverage in the past five years, the Digital Ethiopia Strategy 2025 (DES 2025) has portrayed the strong muscle of a Digital Public Infrastructure (DPI) in fundamentally transforming a poor and lagging finance system in a developing economy.
For a country of about 130 million people, 28 banks and more than 50 microfinance institutions were able to extend financial services to only 46% of the population until two years ago.
However, according to the latest report by the National Bank of Ethiopia, the financial coverage has climbed to about 65% thanks to the aggressive implementation of the DES 2025, as indicated in the Ethiopia Finance Forum held recently here in Addis Ababa.
According to Girum Fekadu, Digital Financial Services Risk Manager at the Ethiopian Postal Service, and Brand Ambassador at AfricaNenda Foundation, the all-out efforts carried out by the government to roll out the digital economy in the past five years were fundamental in fortifying the overall digital ecosystem in the country while specially giving momentum to the encouraging level of DFS so far.
“The DFS ecosystem is overall good, dynamic and rapidly evolving. EthSwitch has played a big role in availing the P2P, and P2M services. A total of 445,000 financial access points are active at the moment. This includes the 415,084 cash or mobile money agents, 10,551 ATM machines, 14,030 POS machines as well as the scores of fintechs and DFS operators like Telebirr, and Mpesa.”
Quoting NBEs Report, Girum highlighted the country’s leap forward in the five years, to raise mobile money from only one million subscribers to 128.5 million with an inactive rate of 28% by December 2024.
The number of daily digital transactions has reached 7.5 million with a transaction value exceeding 26 billion birr, which aggregates to 9.6 trillion birr transactions processed digitally over the past five years, as of November 2024. This shows over 2-fold growth from two years ago.
According to Girum the growth rate of PoS machines compared to the previous year is only 16.7% which is lower than that of ATMs which hit 34.2% in the same period calling for a further push towards better utilization.
The government’s aggressive work on building a digital economy in the past five years has been hailed as a major success factor. Among such measures are the regulatory enactment and enforcement measures that laid the ground for the expansion of the digital economy.
The careful formulation and implementation of the regulatory provisions at the outset of the DES 2025 has worked out a reliable path to the smooth progress of the financial inclusion efforts, according to Melka Girma, Chief Operating Officer of Shega Media and Technology PLC, a company that is offering in-depth insights into Ethiopia’s economy for the past five years by delivering an integrated media, data, and intelligence solution designed to drive informed decision-making and promote innovation.
“Following the issuance of the DES in 2021 non-bank institutions were allowed to engage in the financial services through the application of digital technology. This has raised the number of fintech and enabled the introduction of payment methods like POS operation that were traditionally being provided by Banks. During this period some 16 fintechs have been given license from the NBE though some of them have not claimed their commercial license yet.”
On the frontline of the country’s thus far success in DFS is the massive registration campaign of National Digital ID. The digital ID program which is locally known by its project name Fayda ID was launched in 2023 and as of May 2025, about 15.5 million people have been registered in the nationwide digital ID system.
The registration of people for the Fayda ID has continued without posing any requisites that hamper or delay the registration. The government has set a target to enlist up to 90 million people in the Fayda ID system until the end of 2026. With the current pace of the registration work, the likelihood of registering such a large number of people, if not 90 million, 70 million is achievable, according to Yodahe Arayasellasie, CEO of the Fayda ID project office.
“70 million is actually achievable. Banks are doing their own registrations on-site in different branches. They are in the process of procuring the registration machines. Telcos are a big player in this space. Ethio Telecom is there already doing a massive amount of registration all over Ethiopia; and hopefully, others including Safaricom and the others may join us very soon.”
As observed from the process so far the smooth and fast growth of people recognized digitally, there is likelihood for the rapid growth of DFS as it can catalyze the massive onboarding of people to operational DFS providers.
The DFS currently undertakes the instant, secure and interoperable payment service. The service is currently being rolled out by the country’s main switch operator EthSwitch.
“It’s good to mention the best practices because we are not doing something that has never been done in the world. We bring something that has been done and is the backbone of the country’s economy. This is digital public infrastructure. The one success factor that can be mentioned is India where the card is connected with the national payment corporation of India which is UPI. Then a digital log, which is data access, let’s say the same thing here in Ethiopia we do have a payday and here EthSwitch on the interoperability that is an instant payment system.” EthSwitch executive officer Yilebes Addis says.
Yet the government and other stakeholders need to uphold the efforts so far in order to reach the remaining 35% of the population that is still financially excluded. Keeping aside the erratic coverage of electricity and fledgling internet penetration, the most underlined obstacle on the path towards reaching the unbanked population is the lack of awareness and the digital literacy gap.
According to Melka, even though Digital Financial Services (DFS) are available there is a long way to go in terms of onboarding users, particularly in rural and semi-rural Ethiopia. He says further work needs to be done in terms of helping peoples understand and use digital financial services both in terms of literacy and awareness.
“There are many people who do not know the availability of DFS. They may not even know the various type of digital financial services that their mobile phone can provide. For instance, in Addis Ababa, there are people who do not know the existence of mobile money Agents that are doing cash-in cash-out services. The problem in urban areas is not necessarily a matter of digital literacy rather awareness in most cases. But in rural and semi-rural areas, there is a problem of both literacy and trust and confidence in using available DFS services.”
Concerning the adamant behaviour of people to stick to paper cash for transactions, Girum says there is a prevalence of issues that need to be addressed in order to fast-track the adoption of DFS in the country.
“One of the inhibiting factors is lack of trust. There is also the problem of digital literacy and knowledge. Furthermore, fraud and gender barriers also beset the digital ecosystem.”
In this regard, Shega is running a research and sensitization project entitled AKOFADA (Advancing Knowledge on Financial Accessibility and DFS Adoption), that aims to improve understanding and usage of Digital Financial Services (DFS), focusing on underserved rural areas in line with the strategic approaches and directions of the country to ensure financial inclusion that aims to improve understanding and usage of Digital Financial Services (DFS), focusing on underserved rural areas in line with the strategic approaches and directions of the country to ensure financial inclusion.
Part of the project’s objective is creating a comprehensive knowledge base and DFS hub for stakeholders, where the nation’s fragmented data about DFS converge in one accessible place. In addition, by employing various educational campaigns, Shega’s AKOFADA project also works to raise people’s awareness of DFS and the opportunities at hand.
“This will help to build trust and confidence among users in rural and underserved areas in terms of using available digital financial services. It will also enable stakeholders to identify the gaps and take corrective actions.” Melka indicated.
While fighting the barriers, the government is rolling out the second phase of the NDPS 2026-30 which envisages deepening the digital payment adoption, full interoperability, integration of digital ID, high level of inclusivity as well as promotion of merchant acceptance.
The upcoming journey towards better digital finance service in the country needs to involve the active role of the public and private sector operators with innovative services to reach the unreached as well as to optimize the experiences of current users.
Established more than a century ago, the Ethiopian Postal Service is one of the state-run institutions with the largest network of branches and time-tested experience in delivering agency services.
With its current more than 700 branches and those planned to be opened in the future, Ethiopost is bracing to expand Agency Banking services throughout the country. The Agency Banking services are believed to fast-track the delivery of DFS in the most unreached corners of the country, according to Girum.
Ethiopia Post’s engagement in DFS is in line with the NBE’s user agent directive and can deliver services that are authorized by Banks. The services include account opening, cash-in/cash-out transactions, bill payments, humanitarian cash transfers, airtime top-up, digital ID processing in remote or rural areas.
Currently, EthioPost is working with a super-agent status in agreement with one telecom operator and five major banks of the country, Girum explained. This will approximate the current gap of financial inclusion through providing cost-efficient and trustable service to the unbanked people of remote locations, he added.
BY ZEKARIAS WOLDEMARIAM
THE ETHIOPIAN HERALD WEDNESDAY 28 MAY 2025
