In Ethiopia, deepening financial inclusion is recognized as a crucial driver of economic progress and poverty reduction. According to the World Bank Global Findex Database (2022) report, although Ethiopia has made progress in increasing the number of adults with accounts at financial institutions, there are still significant gaps in financial access, especially compared to other East African countries.

While the percentage of adults with financial institution accounts has increased from 22% in 2014 to over 46% in 2022, gaps exist. More than 75% of the population in rural areas face limited access, and there is a gender disparity with women's account ownership at 39% compared to men's 55%. To address these challenges, the National Bank of Ethiopia has implemented a strategy to increase account ownership to 70% by 2025 and reduce the gender gap. For a detailed assessment of various data sets, please refer to this UNCDF Report.

To support the government's efforts, the UN Capital Development Fund (UNCDF) and MSC Global Consulting collaborated to organize a comprehensive five-week training session on agency banking in Ethiopia. The training, designed for selected financial service providers (FSPs) and non-financial institutions aimed to equip these institutions with the necessary knowledge and skills to enhance their delivery of agency banking and performance measurement, ultimately promoting financial inclusion.

The training carried out in October and November 2023, demonstrated how agency banking is an effective tool for expanding financial access in countries like Ethiopia. It showcased how agency banking enables FSPs to reach remote and underserved areas, providing essential services to individuals previously excluded from the formal banking system.

The training was conducted under two major UNCDF programs:  Strengthening Cash-In/Cash-Out Networks in Ethiopia (CICO) programme supported by the Bill & Melinda Gates Foundation, and the Digital Finance for Resilience (DFS4Resilience) programme, funded by the European Union and the Organization of African, Caribbean, and Pacific States (OACPS). It was delivered in two phases and had a total of 219 participants, with 35 percent of them being female. These participants represented twenty-six institutions including the Central Bank (National Bank of Ethiopia), financial institutions involved in mobile money, FSPs at different stages of mobile money deployment, and master and super agents who have partnered with e-money issuers. The training utilized case studies, group exercises, and use cases to provide practical insights.

The first phase focused on the challenges that hinder the adoption of agency banking in Ethiopia. It examined the existing agency banking model and covered strategies to scale agency banking including effective marketing and communication techniques, and educational activities to encourage usage. Additionally, participants were equipped with tools to evaluate their business performance, ensuring sustainable growth and alignment with the country's goal of achieving 70% account ownership in the next two years.

Some participants displaying their training certificates.

The second phase of the training specifically targeted three financial institutions- Cooperative Bank of Oromia, Commercial Bank of Ethiopia, and Shebelle Bank- involved in humanitarian cash and voucher assistance initiatives in the Somali region of Ethiopia. Participants included officers responsible for training agents, and senior managers, with the aim to establish connections between agency banking, business banking, and performance measurement within the context of humanitarian assistance.

Critical learnings from the training included identifying key metrics and KPIs to drive proper usage and performance improvement. Participants were also encouraged to design products and services that expand the customer base, reach underserved areas, and meet specific client needs. Collaboration and partnerships were highlighted as effective strategies to reduce operational challenges and costs while creating value for customers.

The training also emphasized the role of technology in increasing financial access beyond traditional branches. By leveraging technology, individuals, small businesses, and the informal sector can access essential financial services like savings accounts, loans, and insurance products. Participants were encouraged to utilize digital channels such as mobile phones and point-of-sale devices to facilitate transactions, offering convenience, efficiency, and security. This enables customers to access a wider range of financial services.

"The training addressed crucial challenges related to agency banking, such as fraud and privacy concerns, across various use cases," said Belete Zegeye from the National Bank of Ethiopia. Yonas Tsegaye, Senior Marketing Officer at Commercial Bank of Ethiopia, added, "I learned the importance of using different KPIs to measure agent performance." Participants also provided feedback on various aspects, including their prior training experiences and the need for further training to improve knowledge of emerging trends.

Others also highlighted the practical and case-based training, which they believe would support their day-to-day responsibilities. Endalkachew Girma, a trainee, said, "The training enlightened me on DFS, agency banking, agent viability, fraud prevention, commissioning, liquidity management, customer services, marketing, and branding of agency banking, and recommended use cases for Ethiopia." The training sessions facilitated networking opportunities among industry players and discussions on developing agency banking services within the existing regulatory framework.

Participants working on individual assignments during training session.

The adoption of agency banking holds significant implications for financial inclusion in Ethiopia. Endashaw Tesfaye, Digital Finance Country Lead, UNCDF Ethiopia, said, "The training has equipped participants with practical knowledge and tools to enhance their agency banking operations within their respective organizations. Agency banking empowers citizens and contributes to driving local economic growth. Therefore, financial institutions must consider it a viable alternative in their quest to expand their services and make them more inclusive."

As Ethiopia seeks to accelerate financial inclusion and drive economic growth, embracing agency banking presents a significant opportunity. By leveraging the insights and best practices shared during this training, Ethiopian financial institutions can tailor agency banking models to suit their local context's unique needs and challenges.

UNCDF, through the CICO and DFS4Resilience programmes, remains committed to providing ongoing support and technical assistance to ensure the successful implementation of agency banking in Ethiopia. Additionally, UNCDF will offer other capacity-building initiatives focused on mobile money and agent banking to foster collaboration and knowledge sharing among stakeholders in the financial inclusion ecosystem. Stay tuned for the next training in this space.

Author: Yaa Asamoah Boateng
Communication and Knowledge Management Analyst