Country: Ethiopia

Conceptual Framework of Contingent Liabilities and Guidelines for Managing Loan Guarantees and On-Lending in The MEFMI Region

1.1. Purpose of the Guidelines

The purpose of these Guidelines is to help countries build frameworks for managing loan guarantees and on-lending, by outlining standard structures and processes driven from sound
practices, at regional and global level. A secondary purpose is to provide key information on identifying and monitoring selected sources of contingent liabilities.

The MEFMI member countries are expected to adapt the Guidelines to develop their own frameworks, considering their specific circumstances.

1.2. Managing contingent liabilities

Contingent liabilities are sources of fiscal risks due to the uncertainty that is structurally embedded in them. History has shown that if governments do not manage fiscal risks arising from contingent liabilities and take necessary measures in a timely manner, they can be caught unprepared for their fiscal burden. Therefore, the objective of contingent liability management is to mitigate and manage fiscal risks arising from these liabilities both at the instrument and portfolio level.

Contingent liability management also aims to ensure that the decision makers are well informed about the costs and risks of the contingent liabilities they are considering beforehand. The information assists in the assessment of the contingent liability against other forms of government financing modes, such as on-lending, capital injections and direct subsidies. This objective is applicable for contingent liabilities that are explicitly issued by the government, e.g. loan guarantees. To achieve this objective, the costs and risks of the contingent liabilities should be assessed ex ante.

Study on Managing Sovereign Debt in Times of Crisis: Study Summary: Findings & Lessons

Introduction

COVID-19, believed to have emerged in China in December 2019, spread quickly across the globe and was declared a pandemic by the World Health Organization in January 2020. It triggered one of the most devastating global health and economic crises in modern history, attecting all socio-economic facets and permeating through the financial markets. The IMF (2020) estimates that the impact on developing countries was historic and unusual in severity. Among the various consequences, the pandemic in particular induced major debt stresses, while debt management proved complex and challenging, especially for countries that entered the crisis already vulnerable. Sub-Saharan Atrican countries were more exposed, with limited room tor manoeuvre given their narrow fiscal space, as compared to their situation during the 2008/09 global financial crisis, Operational challenges became frequent as the crisis unfolded, making it difficult to manage risks as working remotely became the default practice.

Globally, many countries took remedial measures to limit the socio-economic impact ot the pandemic as well as cushion local financial markets, Those measures, which mainly centred on fiscal, monetary and financial polies, provide useful lessons tor countries on how to prepare in advance for potential future crises. Against this background, MEFMI, with the support of FSD Africa, commissioned a study that documents debt and related policies and practices that countries adopted to manage public debt and support debt markets during the COVID-19 crisis. The study findings and results are outlined in four chapters focused on the following important and interrelated themes: (i) Macroeconomic policy interventions; (ii) External financing operations; (iii) Local currency bond markets; and (iv) Governance and operational risk management frameworks for public debt. These chapters are available as separate documents and can be accessed here. The current paper, which also forms part of the study, provides an extensive summary of the outcome of the whole exercise. Findings from the study come from a combination of desk reviews and feedback from questionnaires

Study on Managing Sovereign Debt in Times of Crisis: Economic Impact of COVID-19, Policy Responses and Implications on Debt Dynamics

Introduction

The COVID-19 pandemic resulted in an unprecedented health and economic crisis across the world. Although sub-Saharan Africa has suffered a smaller death toll compared to the rest of the world, the pandemic has led to a sharp economic downturn in the region. As the pandemic spread, MEFMI member states joined the rest of the world in implementing measures to curb the spread of the virus. Such measures included national lockdowns, overnight curfews, border and port closures, social distancing, and greater rigour in hygiene, such as washing of hands and hand sanitisation.

While such measures have saved lives, they have at the same time severely attected economic activity and negatively impacted the livelihoods of millions of people, leading to declines in aggregate demand and output. The services sectors, which include tourism, transport, education, entertainment, sports and restaurants, were the most affected The economic effects of the pandemic were exacerbated by the presence ot a large intormal sector, which Is prevalent in most MEFMI member states. Besides domestic factors, the region was also affected by a deteriorating external environment, characterised by weak global demand and supply chain disruptions. T his affected tourism, exports receipts, foreign direct investment (FDI) inflows and international reserve positions, and led to a shortage of key imports. As a result, COVID-19 led to a decline in GDP growth rates. This in turn affected local revenue collections, in the face of the increased expenditure required in order to save lives and livelihoods.

As elsewhere in the world, MEFMI countries had no choice but to respond to the crisis. The effect of the pandemic on member countries varies from country to country in view of the diversity of the group. MEFMI countries span three income groups. Four countries are classified as low-income: Malawi, Mozambique, Rwanda and Uganda; seven as lower-middle income: Angola, Eswatini, Kenya, Lesotho, Tanzania, Zambia and Zimbabwe; and two as upper-middle income: Botswana and Namibia. The structures of the various economies in the group also differ. MEFMI includes mineral-rich and oil-exporting countries such as Zambia, Botswana and Angola, while other countries …

Study on Managing Sovereign Debt in Times of Crisis: External Financing Operations

Introduction

Since the beginning of 2020, countries around the world have been grappling with the worst economic, social and sanitary crisis of recent times. At the end of March 2020, the IJN was already warning about a ‘looming financial tsunami* for developing countries. Then, the dark clouds from the COVID-19 pandemic suddenly clogged all aspects of economic and social life. The pandemic brought about a severe contraction of productive sectors and overall GDP, increased unemployment; and put serious pressure on countries’ fiscal balance sheets through reduced revenue collection, the need for massive budgetary reallocation to finance urgent expenditure in health and other essential services, and the urgent need to put in place social safety nets for the most vulnerable segments of the population.

The COVID-19 pandemic is still evolving as the virus continues to mutate and infect more people around the globe. Initially, some observers felt that Africa had not been unduly affected by the spread of the pandemic.

However, it has become clear that the pandemic’s economic and social impact on African countries has been as considerable and pronounced as in other parts of the world. Despite recent progress in strengthening health systems, dealing With future waves of COVID-19 is likely to be more challenging in Africa than in other parts of the world, given limited access to healthcare across the continent and the availability of vaccines. According to the World Health Organization (WHO), as of mid-January 2022, only 17.31 vaccine doses per 100 population had been administered in Africa, compared to 143.14 in Europe, 144.4 in the Americas, 102.87 in South-East Asia and 185.21 in the Western Pacific. If indeed the reduction in mortality rates experienced in other continents is attributable to vaccination, then as the least vaccinated continent Africa remains very much at risk.’

According to the IMF, since the onset of the COVID-19 pandemic, real GDP of sub-Saharan African countries fell by 1.9 per cent in 2020, the worse performance on …

 

Study on Managing Sovereign Debt in Times of Crisis: Local Currency Bond Markets

Introduction

The COVID-19 pandemic that spread across the world in early 2020 triggered one of the most devastating global health and economic crises in modern history. The crisis affected all facets of socio-economic functioning, permeating through the financial markets. According to the IMF, the impact of COVID-19 on developing countries was historic and unusual in its severity as it induced debt stresses that exceeded past experiences across several dimensions (IMF, 2020). These included a sudden increase in government borrowing needs, a sharp downturn in economic activity, strain in market conditions and disruption in normal operations.

As reviewed in Chapter Two of this study, managing sovereign debt proved complex and challenging, particularly for debt managers in developing economies. Most of them entered the crisis with
pre-existing vulnerabilities (AfDB, 2021), especially limited fiscal space due to other localised shocks. Faced with significantly narrow fiscal space compared to its situation during the 2008/09 global financial crisis, sub-Saharan Africa was caught with limited room for manoeuvre. Specifically, 16 countries were either at high risk of debt distress or already in debt distress prior to the pandemic. In addition, their funding conditions remained highly vulnerable to global risk dynamics and therefore historically more volatile than in advanced economies (OECD, 2020). The stage of development and efficiency of local currency bond markets exacerbated debt managers’ challenges.

Operational challenges escalated to unprecedented levels during the crisis. It became evident that the pandemic created challenges on how to meet increased government borrowing requirements
against a backdrop of volatile market conditions, both locally and globally Worse still, the adoption of remote working arrangements changed the overall control environment in which staff performed their roles, thus exacerbating the vulnerability of debt management offices (DMOs) to operational risks. Generally, it is more challenging to manage risks in a dispersed remote working situation than in an office

Study on Managing Sovereign Debt in Times of Crisis: Governance and Operational Risk Management Frameworks for Public Debt

Introduction

The COVID-19 pandemic has caused devastating economic and social disruption across the world. It has especially affected developing countries, which were not fully prepared and had limited leeway to take the required preventive measures.

As seen in previous chapters of this study, not only was the impact of COVID-19 historic and unusual in its severity for developing countries, it caused immense debt stresses and put fiscal pressure on governments’ economic and financial fortunes. Faced with increasing requirements to spend on health and other essential services at a time when economic activity had all but stalled and revenue streams dried up, the need to resort to additional government borrowing became inevitable. That pushed the average general government gross debt-to-GDP ratio to 57.8 per cent at the end of 2020 for the 45 countries in the sub-Saharan Africa region, from 51.5 per cent in 2019. This was the highest level in almost 20 years, and an increase of more than six percentage points in just one year (IMF, 2021).

The fact that developing economies were already facing different vulnerabilities before the pandemic made it more difficult for them to manage the level of sovereign debt. Pressures particularly came from issues such as fast-growing interest expenses as a share of revenue, rollover risks due to shorter debt maturities, a narrowing of the differential between the real interest rate and growth, expanding contingent liabilities and, in some countries, debt collateralisation with limited transparency (AfDB, 2021). As seen in Chapter One of this study, the region entered the crisis with significantly less fiscal space than it had at the onset of the global financial crisis of 2008/09, with 16 countries either at high risk of debt distress or already in distress in 2019. At the same
time, the funding conditions of these countries were vulnerable to global risk sentiment and therefore historically more volatile than in advanced economies (OECD, 2020).

United Kingdom Government reiterates commitment to Africa’s green industries

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In line with the UK Government’s commitment to supporting clean, green and sustainable economic growth in Africa, UK Foreign Secretary James Cleverly visited a Nigerian e-mobility platform and electric vehicle assembler, MAX Nigeria.

 

With support from the UK-funded Manufacturing Africa programme, MAX raised $31 million to ramp up the assembly of electric two- and three-wheelers. MAX is now gearing up for a third capital raise, to fund its expansion to become a regional e-mobility player. MAX Nigeria has empowered over 21,000 drivers operating in 8 cities within Nigeria and has contributed to cutting 52 metric tons of CO2 emissions from the environment.

Manufacturing Africa’s team of McKinsey consultants conducted a market assessment of the electric vehicle value chain for MAX, contributing to their electric vehicle (EV) scale-up strategy. UK-linked financiers including Novastar (backed by British International Investment) and Shell Foundation are some of the organisations financing MAX’s growth. MAX has also found a UK business partner in Field Ready, to support them on recruitment.

Work with MAX is part of the UK’s support for economic growth, job creation and value-addition in Africa that aligns with global climate priorities.

British funds continue to support game-changing entrepreneurs and companies in Africa. British International Investment manages a $4.7bn investment portfolio in Africa, including 86 companies and 43 funds in Nigeria alone. Other funding sources include:

  • Infracredit, which provides local currency guarantees to unlock long-term infrastructure financing in Nigeria
  • FSD Africa Investments, which invests in order to improve the financial instruments supporting Africa’s green economic growth
  • the Climate Finance Accelerator, a public-private finance initiative that supports low-carbon projects

Importantly, the UK also provides support for companies to access investment, whether from the UK or elsewhere. The Manufacturing Africa programme is supporting 22 manufacturers to land investments in Nigeria, with a pipeline of $664m+ foreign direct investment (FDI). The programme supports over 120 companies across 5 countries in Africa, which are mitigating 239,000 tonnes of carbon dioxide, while creating 14,000 new jobs.

British High Commissioner to Nigeria, Richard Montgomery said: “I am delighted to visit MAX Nigeria with our Foreign Secretary James Cleverly. MAX are truly innovative and entrepreneurial, solving a thousand problems at once to bring affordable electric vehicles to West African riders.”

It is fantastic that a combination of UK public and private sector support is helping MAX to create jobs, bring new skills into the market, and solve climate change challenges. We will continue to support companies doing this groundbreaking work on the continent.

Chief Executive Officer and Co-Founder of MAX Nigeria, Adetayo Bamiduro said: “Our mission at MAX is to continue scaling the impact of our vehicle subscription platform across Africa and to deliver on our commitment to provide sustainable income to millions of mobility entrepreneurs by enabling them to access income-generating, energy-efficient, and electric vehicles that meet the essential needs of Africans.”

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For success, planned Ethiopian capital market needs patience and smart policy

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hen coming to power in 2018, a new Ethiopian government embarked on an ambitious path of reform, inspiring widespread optimism at home and abroad.

After political changes backfired, oppressive practices returned, and the efforts at economic modernization have suffered from the turbulence.

Amid these efforts, Ethiopia’s economy has been grappling with severe challenges, both exogenous, like the disruption to global supply chains and high energy prices, and endogenous, such as conflicts and chronic drought.

Yet the government’s approach, including inconsistent fiscal and monetary policies, aggravates the problems.

According to Fitch Ratings, which again recently downgraded Ethiopia’s credit rating, the country is now at “significant risk of default”, directly attributed to low foreign currency reserves and lack of a convincing strategy to replenish them.

The projected deficit of the 2022/23 budget is 281 billion birr out of an approved 800 billion birr. Underlining the constraints, State Minister for Finance Eyob Tekalign recently hinted that the government payroll may have to be slimmed down.

In addition, the Civil Service Commission has approved a bill that allows public servants to hold two roles at the same time. The state minister also confirmed that the Ministry of Finance will not be able to meet any supplementary budget requests.

Capital Policies

It is in this environment that the government is seeking to establish a capital market for the government, businesses, and individuals to buy and sell securities, such as bonds, stocks, and derivatives.

The National Bank of Ethiopia’s 2021 Capital Markets Proclamation proposed a ten-year implementation plan structured around four pillars: market development, capacity development, infrastructure development, and policy reviews.

The law established the Ethiopian Capital Market Authority and led to the creation of the Ethiopian Securities Exchange in late 2022 under the supervision of the Ministry of Finance and guidance of FSD Africa.

The ESX launched fundraising efforts in May 2023 by selling 75 percent of its equity with 25 percent held by Ethiopian Investment Holdings, a new sovereign wealth fund.

While these policies are geared towards a desirable goal—as a fully functioning capital market would eventually boost investment—given Ethiopia’s currently challenging socio-economic landscape, it is a risky move, and so needs to be carefully prepared for and sequenced with other economic policies.

Monetary Fragility

First of all, Ethiopian policy makers need to address the risk of a sovereign default. The government has been struggling to meet interest payments on its debt in recent years as hard currency reserves dwindled.

The balance of payments crisis emerged as growth, loans, grants, investments, and exports all slumped or stagnated, the latter not helped by the U.S.’s removal of duty-free market access on textiles and other selected goods due to Washington’s concerns over the conduct of the Tigray war.

Furthermore, reforms have been impeded not just by economic conditions and political turmoil but also by restrictive regulatory action.

In early 2021, Ethiopia appealed to the International Monetary Fund (IMF) for help. The negotiations, partly over debt restructuring, have progressed since and, since April 2023, Ethiopia was rumored to be in line for a $2-billion bailout.

Devaluation Dangers

While this would provide much-needed hard currency, the IMF is likely to urge liberalization of the exchange-rate regime, which in Ethiopia’s case would surely mean a drop in the over-valued birr.

This would bring its own set of challenges.

In the long run, devaluation might attract foreign investment by lowering production costs and making Ethiopian exports more competitive. However, in the short run, a rise in import and debt-servicing costs could exacerbate the foreign exchange crunch and reinforce inflationary pressures.

Therefore, Ethiopia’s central bank would need to impose higher interest rates to curb inflation, increasing borrowing costs for businesses and consumers. This would deter some of the foreign investors that the Ethiopian stock market aims to attract.

These worries partly explain why the government has so far resisted exchange-rate liberalization or another major central bank-driven devaluation.

Real Risk

Fortunately, there are measures to mitigate these risks, such as the government intervening in currency markets to shore up the value of the birr (which may explain reports that Addis is seeking as much as $12 billion from the IMF and other sources), and investors seeking assets like real estate that tend to increase in value during inflationary periods.

But this latter remedy comes with yet another bitter pill: while it might work for investors, it may well not for the public.

In fact, as Ethiopia’s real estate sector has become one of the main magnets for investment, it poses a concentration risk, meaning the simultaneous and heightened losses that arise when unfavorable circumstances hit a portfolio largely consisting of a single asset.

hen coming to power in 2018, a new Ethiopian government embarked on an ambitious path of reform, inspiring widespread optimism at home and abroad.

After political changes backfired, oppressive practices returned, and the efforts at economic modernization have suffered from the turbulence.

Amid these efforts, Ethiopia’s economy has been grappling with severe challenges, both exogenous, like the disruption to global supply chains and high energy prices, and endogenous, such as conflicts and chronic drought.

Yet the government’s approach, including inconsistent fiscal and monetary policies, aggravates the problems.

According to Fitch Ratings, which again recently downgraded Ethiopia’s credit rating, the country is now at “significant risk of default”, directly attributed to low foreign currency reserves and lack of a convincing strategy to replenish them.

The projected deficit of the 2022/23 budget is 281 billion birr out of an approved 800 billion birr. Underlining the constraints, State Minister for Finance Eyob Tekalign recently hinted that the government payroll may have to be slimmed down.

In addition, the Civil Service Commission has approved a bill that allows public servants to hold two roles at the same time. The state minister also confirmed that the Ministry of Finance will not be able to meet any supplementary budget requests.

Capital Policies

It is in this environment that the government is seeking to establish a capital market for the government, businesses, and individuals to buy and sell securities, such as bonds, stocks, and derivatives.

The National Bank of Ethiopia’s 2021 Capital Markets Proclamation proposed a ten-year implementation plan structured around four pillars: market development, capacity development, infrastructure development, and policy reviews.

The law established the Ethiopian Capital Market Authority and led to the creation of the Ethiopian Securities Exchange in late 2022 under the supervision of the Ministry of Finance and guidance of FSD Africa.

The ESX launched fundraising efforts in May 2023 by selling 75 percent of its equity with 25 percent held by Ethiopian Investment Holdings, a new sovereign wealth fund.

While these policies are geared towards a desirable goal—as a fully functioning capital market would eventually boost investment—given Ethiopia’s currently challenging socio-economic landscape, it is a risky move, and so needs to be carefully prepared for and sequenced with other economic policies.

Monetary Fragility

First of all, Ethiopian policy makers need to address the risk of a sovereign default. The government has been struggling to meet interest payments on its debt in recent years as hard currency reserves dwindled.

The balance of payments crisis emerged as growth, loans, grants, investments, and exports all slumped or stagnated, the latter not helped by the U.S.’s removal of duty-free market access on textiles and other selected goods due to Washington’s concerns over the conduct of the Tigray war.

Furthermore, reforms have been impeded not just by economic conditions and political turmoil but also by restrictive regulatory action.

In early 2021, Ethiopia appealed to the International Monetary Fund (IMF) for help. The negotiations, partly over debt restructuring, have progressed since and, since April 2023, Ethiopia was rumored to be in line for a $2-billion bailout.

Devaluation Dangers

While this would provide much-needed hard currency, the IMF is likely to urge liberalization of the exchange-rate regime, which in Ethiopia’s case would surely mean a drop in the over-valued birr.

This would bring its own set of challenges.

In the long run, devaluation might attract foreign investment by lowering production costs and making Ethiopian exports more competitive. However, in the short run, a rise in import and debt-servicing costs could exacerbate the foreign exchange crunch and reinforce inflationary pressures.

Therefore, Ethiopia’s central bank would need to impose higher interest rates to curb inflation, increasing borrowing costs for businesses and consumers. This would deter some of the foreign investors that the Ethiopian stock market aims to attract.

These worries partly explain why the government has so far resisted exchange-rate liberalization or another major central bank-driven devaluation.

Real Risk

Fortunately, there are measures to mitigate these risks, such as the government intervening in currency markets to shore up the value of the birr (which may explain reports that Addis is seeking as much as $12 billion from the IMF and other sources), and investors seeking assets like real estate that tend to increase in value during inflationary periods.

But this latter remedy comes with yet another bitter pill: while it might work for investors, it may well not for the public.

In fact, as Ethiopia’s real estate sector has become one of the main magnets for investment, it poses a concentration risk, meaning the simultaneous and heightened losses that arise when unfavorable circumstances hit a portfolio largely consisting of a single asset.

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New report lays out urgent actions, that regulators can take to safeguard the new agenda for nature – key to Africa’s financial future

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Nairobi, 25 July 2023: A new report from the collaborative forum of African financial institutions the African Natural Capital Alliance (ANCA) and management consulting firm Oliver Wyman has underlined the growing importance of African regulators acting on nature-related risks in line with their mandate of maintaining financial stability.

The report “Improving the transparency of nature-related risks in Africa: the emerging regulatory agenda”, outlines how financial sector stakeholders, including regulators, are increasingly recognising that the depletion of nature poses risks to financial and economic stability.

The report makes clear that the issue is a particularly urgent one for sub-Saharan Africa as its economies are disproportionately dependent on nature. For instance, over 70% of people living in the region are dependent on forests and woodlands for their livelihoods, compared to about half of the total world’s GDP generated in industries that depend on nature. The rate at which nature in Africa is being lost also exceeds the global average. For example, Africa’s Biodiversity Intactness Index (BII) score – which measures the number and abundance of species on land – declined by 4.2% between 1970 and 2014, considerably higher than the global BII score decline of 2.7% over the same period.

In East Africa alone, failure to protect natural capital as a whole (including its stocks of soil, air, water, and all living things, which underpin the region’s economy and human well-being) would result in an economic loss of more than $11.3 billion a year, according to an assessment commissioned in 2021 by USAid.

Dorothy Maseke, the Nature Lead at FSD Africa and ANCA, says: “Enhanced transparency of nature-related risks is fundamental to managing them effectively. This is the case for individual financial institutions, which need visibility of the nature-related risks in their lending, underwriting, and investment portfolios. And it is also the case for regulators, so that they can identify nature-related risk concentrations for regulated entities and assess whether they are being managed effectively.”

African regulators embracing this complexity is so important, she adds, because the continent is disproportionately exposed to nature-related risks.

Sandra Villars, senior advisor at Oliver Wyman, says: “The Global Biodiversity Framework (GBF), which was adopted in December 2022 by 188 governments across the world, aims to address biodiversity loss, restore ecosystems, and protect indigenous rights. This landmark agreement prompts governments to introduce policies to manage nature loss, which will lead to regulators having to act, and highlights the opportunities for regulators to do so proactively.

African regulators could thus benefit from engaging with this new agenda early and being at the forefront of integrating nature into their regulatory regimes.”

As summarised in the report, there are four simple steps regulators can take as part of a nature-related disclosure roadmap while policy frameworks are being finalised in their jurisdictions:

  1. Engage with finance and environment ministries to align their regulatory approach with
  2. government’s policy agenda on nature
  3.  Assess internal capacity and act on gaps
  4.  Assess the capacity for action among regulated entities
  5.  Engage in voluntary nature networks such as the Sustainable Insurance Forum (SIF), the Network for Greening the Financial System (NGFS), the African Natural Capital Alliance (ANCA), and the Task Force on Nature-Related Financial Disclosures (TNFD)

NBE to Make Digital ID Primary for Use by Banks

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ADDIS ABABA – The Digital Identification (ID), named Fyda, is on the fast track to becoming a primary ID for use by all financial institutions in Ethiopia.

The move is among the “major steps the National Bank of Ethiopia (NBE) is taking “to modernize the financial sector consistent with its mandate.”

To this end, the NBE says extensive work has been undertaken to introduce a foundational Digital ID for use by all financial institutions in collaboration with the National ID Project.

“Today, we announce the launch of two initiatives centered around the introduction of a Digital ID,” the NBE announced on Monday.

Backed by the World Bank, the government is implementing a nationwide biometric digital ID system, aiming to register all eligible Ethiopians by the end of 2025.

NBE’s first initiative targets onboarding all financial sector customers to the digital ID platform in the 2023/24 Ethiopian fiscal year (or 2016 EFY).

The central bank says the initiative will increase financial inclusion by removing barriers to entry.

“This process will follow several legal and technical safeguards, including cybersecurity and personal data protection principles, enshrined within the existing legal framework,” the NBE said. “As such, a Digital ID will be able to serve as a primary Bank ID and will have legal acceptance in all financial institutions.”

Parallelly, the central bank and the Digital ID Project will also implement another initiative involving “the use of the Digital ID in the financial sector’s Know-Your-Customer (e-KYC) processes.”

The ID platform, named ‘Fayda’, would offer a “reliable and real-time identity verification system,” the central bank said, and can serve as a basis for onboarding new customers and for introducing new digital products while mitigating associated financial risks.”

“The use of such e-KYC processes can significantly reduce barriers to financial access and improve service delivery standards,” the NBE added

The digital biometric ID includes an individual’s name and gender, iris scan, and fingerprints, and also displays date of birth, gender, address, and photograph.

“The implementation of the Digital ID as a Bank ID in Ethiopia will significantly improve the transparency, stability, and security of the financial sector,” the NBE said, and it will also “complement national development plans geared towards establishing a digital economy.”

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