The United Nations Capital Development Fund seeks to unite and support industry stakeholders in building Ethiopia’s DFS ecosystem. Despite the current challenges it is facing, such as a comparatively low level of digital finance penetration, gaps in account ownership, lack of infrastructure, a need for more conducive regulations, among others, Ethiopia has a lot of potential. It has shown great determination to forge ahead and ensure inclusivity for all its people, especially the underserved and the unbanked.

And it is exactly how UNCDF aims to contribute to the development of the DFS ecosystem in Ethiopia. Mike McCaffrey, UNCDF's Eastern and Southern Africa Regional Manager, aptly stated at the launch of the first meeting of the DFS Working Group in December 2021, that, "Ethiopia has an unchartered path as the DFS ecosystem is unique. However, its growth should be inclusive so that the most significant discrepancies like access for the uneducated, low-income earners, the unemployed, women, etc., are addressed to improve their quality of life. As much as UNCDF welcomes competition in the digital financial services space to bring efficiency to the business model, it often advocates for coopetition, which fosters cooperation and aligns efforts for the greater public good as no single entity can do it all." And it is exactly how UNCDF aims to contribute to the development of the DFS ecosystem in Ethiopia.

The working group dubbed ‘Digital Financial Services Working Group’ was set up based on this collaborative and coopetition approach that is crucial to building Ethiopia’s DFS ecosystem. The Working Group comprises financial service providers, FinTech companies, Mobile Network Operators (MNOs), Remittance Service Providers, Pension, and Insurance Providers, etc.

At this first event, panelists, speakers, and participants also shared insights and learnings on the current DFS ecosystem in Ethiopia and the strategies that needs to be employed to ensure financial inclusion for all. They discussed the objective of the working group, which includes;

• Combining their expertise as private sector players to push for and accelerate changes in the DFS policy and regulatory environment
• Undertake advocacy and research work, collaborate, and cooperate with the regulatory body and other government entities and
• build capacity for industry players and all others who are interested in the industry.

Speaking also on the new joint initiative, the implementing partners shared the following: Sanne Willems (European Union): The EU and its Member States (Team Europe) have prioritized to support Ethiopia’s digital transformation through the new Team Europe Initiative. Among e-services, digital infrastructure and skills building, we strongly believe that support to digital financial services and more specifically women’s financial inclusion, can enable women to participate in the labour force, control assets, establish and access funding to grow formal businesses and make their own economic decisions.”

Escipión J. Oliveira Gomez (OACPS): The OACPS is proud to join forces with the European Union and the UNCDF in this initiative, executed within the third pillar, Financial Inclusion, of the Joint ACP-EU Private Sector Development Strategy. This specific programme shall contribute to improve the livelihoods of Ethiopian entrepreneurs by strengthening the competitiveness of the country’s MSME network.

The efforts to unite stakeholders and build a resilient digital finance ecosystem for Ethiopia are off to a progressive start. As Africa's second-most populous country, with more than 110 million people, the current narrative of having a low rate of account ownership in the region can be changed by creating access to digital financial services for marginalized segments like women, youth, and rural communities.

The UNCDF and its partners- the European Union and the Organization of Africa, Caribbean, and Pacific States, through its ‘Inclusive Digital Economies for the SDGs’ Programme, is working to ensure that no one is left behind in the digital era. The UNCDF will thus play the role of facilitator and catalyst in the countries where it operates. With an emphasis on data, we adopt a focused strategy to build inclusive digital economies that work for all. Skills, innovation, infrastructure, policy and regulation serve as the building blocks that underpin the UNCDF approach and represent the foundation of the inclusive digital economy.

In line with this goal, UNCDF, with its partners, has taken the initiative to support the launch of the DFS Working Group to support key reforms for Ethiopia's digital transformation and the uptake of digital finance services. Such collaborations among industry players, government agencies and regulators incubate digital finance innovations to reach the unbanked, poor and remote populations who have been excluded from traditional financial networks.

This blog is the second part in the series. You may read the first part here