• Tue. May 28th, 2024

Leveraging E-Payments for Financial Inclusion in Ethiopia

Safety net client receiving manual cash payments from a government cashier in Dire Dawa. Photo: Tewodros Tassew Kebede / World Bank

From remote rural areas to bustling cities across the country, Ethiopia’s safety net programs–some of the largest in Africa–are helping more than 9 million poor and vulnerable people meet their needs and cope with multiple shocks through cash transfers. An additional benefit? Ethiopia is increasingly using electronic cash transfers for its social assistance programs, improving efficiency and transparency, and transforming lives  by connecting participants with the country’s growing formal financial services.

These payments create stronger safety net programs. Electronic transfers eliminate the need for physical distribution of cash or food, increasing the speed of payments and reducing costs and the risk of theft or loss . Records generated during electronic payments also provide valuable data for reporting, monitoring, and evaluation, improving program effectiveness.

Electronic payments also have benefits for poor and vulnerable Ethiopians. Before introducing electronic payments, many of the program’s recipients did not have access to formal financial services. They were often excluded from the banking system due to a lack of identification documents or proximity to bank branches. The use of e-payments creates an entry point for the unbanked population to access formal financial services, providing a secure and convenient way to save, send, and receive money. Further, existing use of bank accounts and digital platforms to deliver cash transfers could improve their resilience during shocks such as health emergencies or natural disasters.

When initiating the rural Productive Safety Net Program (PSNP) in 2005, the Ethiopian Government provided cash transfers through the regular physical cash payments. The newer Urban Productive Safety Net and Jobs Program (UPSNJP) has used electronic payments since its launch in 2016. Expanding financial inclusion

The shift to electronic cash transfer payments comes at a time of rising use of digital financial services. According to the National Bank of Ethiopia, adult Ethiopians with a bank account jumped from 22% in 2014 to about 45% in 2020. The World Bank’s Global Findex Database has also reported that Ethiopia’s financial inclusion has reached 46% as of 2022. Building on this remarkable progress, Ethiopia’s recently revised financial inclusion strategy aims for 70% of people to have a bank account by 2025. In addition to enhancing access to formal banking services and encouraging savings in these accounts, Ethiopia has strengthened financial inclusion by expanding access through bank branches and agent networks and promoting adoption of mobile money services.


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