Period: 25 April- 10 June 2022
Client: MS4G (Palladium)
Target: Banks and MFI, FiTechs
Region: National

Key themes: Providing financial services to smallholder farmers and the rural population in general is challenging due to high transaction cost, information asymmetry and regulatory bottlenecks. Digital platforms and financial services can play a major role in addressing these challenges.

Digital financial service encompasses mobile financial services (MFS) and all branchless banking services that are enabled via electronic channels. Services can be accessed using a variety of electronic instruments, including mobile phones, PoS devices, electronic cards (credit, debit, smart card, key fobs), and computers. Similarly, “digital payments” cover mobile payments and electronic payments, while digital money covers mobile money and electronic money. Digital channels using FINTech and Service providers can improve access to and use of financial services by lowering costs for banks and other financial institutions (through reducing the need for brick-and-mortar branches) and for customers (through reducing transaction costs), increasing the speed of transactions, improving the quality of service, and covering a wide geography.

In Ethiopia, DFS is not only a recent phenomenon it is also at the infant stage. The recent ratification of the country’s Financial Inclusion Strategy in 2016 and the subsequent National Digital Payments Strategy in 2021 involving payment directives and guidelines have given much needed impetus to the growth and expansion of DFS application in the country. This technical study presents key findings on the current digital financial landscape in Ethiopia, related challenges and main features with regard to securing financial inclusion for SHFs through digital platform and provides recommendations to improve strategic engagement. The assessment used value chain approach and considers the entire value chain nodes to locate intervention points and shape corresponding actions. The assessment required desk review of related literature augmented with primary data from key informants such as value chain actors, lead farmers, SMEs and farmers’ cooperative unions.