Building on Progress

The Ethiopian Journey Towards a Truly Inclusive Economy

Over the past few decades, Ethiopia has embarked on a commendable journey towards creating a more inclusive economy. One noteworthy policy initiative has been the introduction of interest-free banking, initially offered through windows within conventional banks and later evolving into full-fledged institutions in 2020. This move has had a significant impact on the vast unbanked Muslim population in Ethiopia, fostering financial inclusion and empowering citizens who were previously excluded from the formal financial system. The impact extends far beyond the economic sphere, playing a crucial role in social empowerment and paving the way for a more equitable society.

However, while Ethiopia deserves recognition for its progress, a truly inclusive economy necessitates a broader approach. Here, we can learn valuable lessons from countries successfully implementing inclusive economic models. Brazil’s Bolsa Família program, for instance, offers a compelling example. This conditional cash transfer program provided financial assistance to low-income families, stipulating that the funds be used for healthcare and education. The program demonstrably reduced poverty and inequality, highlighting the power of targeted interventions in promoting social mobility.

Another critical area for consideration is access to credit for micro, small, and medium-sized enterprises (MSMEs). These businesses are the backbone of many developing economies, generating employment and fostering innovation. Countries like Bangladesh have made significant strides in this area. The Grameen Bank, a microfinance institution pioneered by Muhammad Yunus, has empowered countless women entrepreneurs by giving them access to small loans, enabling them to launch and grow their businesses. This model fosters economic growth and empowers women, contributing to a more inclusive society.

Furthermore, a thriving private sector is essential for building a truly inclusive economy. Governments can play a crucial role in creating an enabling environment for private businesses to flourish. This includes streamlining regulations, reducing bureaucratic hurdles, and investing in infrastructure development. Examples like Vietnam’s Doi Moi reforms, which transitioned the country from a centrally planned economy to a market-oriented one, demonstrate the transformative potential of fostering a vibrant private sector. By creating an environment conducive to business growth, the government can unlock many opportunities for entrepreneurship and job creation, ultimately benefiting a broader population segment.

In the context of Ethiopia, several areas hold promise for progress. Streamlining land ownership regulations, particularly for small-scale farmers, can empower them to leverage their land as collateral for loans, facilitating investment and agricultural development. Additionally, investing in education and vocational training, specifically focusing on rural communities, can equip Ethiopians with the skills they need to secure better-paying jobs and participate more fully in the economy.

Technology also has a crucial role to play. Expanding access to digital financial services can revolutionize financial inclusion, particularly in remote areas. Furthermore, promoting digital literacy can equip Ethiopians with the skills to navigate the digital economy and access a broader range of opportunities. Ethiopia is making commendable progress in this respect and must keep the journey steadfast.

Building a truly inclusive economy is a marathon, not a sprint. While Ethiopia has made commendable strides, the journey continues. By learning from successful models implemented elsewhere, fostering a vibrant private sector, and investing in its people’s potential, Ethiopia can create an economy that works for all its citizens, promoting shared prosperity and a more equitable society. The success of this endeavour will hinge on a multi-pronged approach that addresses both the financial and social aspects of inclusion, ensuring that no Ethiopian is left behind. EBR

12th Year • April 2024 • No. 128

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Ethiopian Business Review | EBR is a first-class and high-quality monthly business magazine offering enlightenment to readers and a platform for partners.

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