Ethiopia’s life insurance sector is facing significant challenges, as industry leaders call for improved government policies to increase awareness and participation among citizens. Life insurance is designed to alleviate the financial burden on families following the death of a loved one by distributing funds to beneficiaries. However, the uptake of life insurance in Ethiopia remains low, with many individuals unaware of its benefits.

Despite Hibret Insurance’s efforts over the past 30 years, the company reported only 232 million Birr in life insurance premiums for the 2023/24 fiscal year, a stark contrast to the total premium collection of 1.72 billion Birr, where non-life insurance operations dominate. Meseret Bezabih, CEO of Hibret Insurance, emphasized that while efforts have been made to promote life insurance, they have not resulted in substantial growth. “It is crucial for people to be informed about life insurance and for government policies to support its growth,” she stated.

One major barrier to increasing life insurance coverage in Ethiopia is the lack of awareness among the population. Many potential policyholders do not understand how life insurance works or its importance in providing financial security. Additionally, there are no current government policies mandating life insurance, which is a practice seen in many other countries. Meseret pointed out that while Ethiopia once implemented mandatory life insurance policies, these have since fallen by the wayside.

In a recent statement marking its 30th anniversary, Hibret Insurance highlighted its role as a pioneer in the industry when private investment was allowed two decades ago. The company has grown significantly since then, boasting 714 shareholders and reaching a fully paid-up capital of 1.1 billion Birr in the current fiscal year.

The need for comprehensive policy reform has become increasingly urgent as Ethiopia seeks to improve its life insurance sector. Experts argue that establishing mandatory life insurance could not only boost participation but also provide essential financial protections for families across the country.

The gig economy in Ethiopia is still in its infancy, yet it has become a vital source of income for millions of workers who operate outside the formal employment sector. However, as this sector expands, there is a pressing need for policies specifically designed to protect gig workers, many of whom lack formal contracts and legal protections.

Gig workers in Ethiopia typically engage in short-term tasks that can be completed within hours or days. Common roles include cleaning services, plumbing repairs, electrical work, and childcare. Unfortunately, these workers often operate in a legal gray area, with many performing their jobs without any formal employment terms or protections. A recent study highlighted that domestic workers, such as housemaids providing part-time cleaning or cooking services, often work “in the shadows,” without any domestic laws governing their employment.

In response to these challenges, a panel discussion titled “Gig Economy in Ethiopia: Opportunities, Challenges, Ways Forward” was held to explore how to create dignified and fulfilling work opportunities for the country’s youth. This event was part of the Mesirat Program, which aims to reshape Ethiopia’s gig economy through a youth-centric approach. The discussion emphasized the importance of establishing Gig and Professional Marketplaces (GPMs) across the nation.

Experts at the event underscored the urgent need for protective policies that also facilitate growth within the gig economy. They addressed key issues such as taxation, worker protection, and labor law strategies. According to last year’s Mesirat policy digest research, only 17% of independent contractors possess a license with tax liability, indicating a significant compliance gap. For the remaining 83% of contractors, platforms withhold 30% of their income, highlighting their responsibility to manage tax obligations on behalf of gig workers.

The panel also discussed the potential benefits of implementing regulatory sandboxes tailored for gig platforms to thrive. Bernard, one of the experts present, advocated for such measures to encourage innovation and growth within the sector.

Menna Tafesse, Director of the Mesirat Program, emphasized Ethiopia’s potential to lead in developing its gig economy using homegrown resources. “Ethiopia is positioned to lead with homegrown economic resources,” he stated. “Creating an enabling environment can disrupt and empower the gig economy.”

The Mesirat Program is a five-year initiative aimed at creating opportunities for one million highly skilled workers by establishing and nurturing 100 GPMs across the country. Co-created by the Mastercard Foundation and Gebeya Inc., along with a consortium of partners, the program focuses on four key components: recruitment, vetting, upskilling, and gig matching.

As part of its mission to enable one million young people to secure dignified work while upskilling an additional two million individuals, the program collaborates with various energetic and competent partners.

The call for protective policies comes at a critical time as Ethiopia seeks to harness the potential of its gig economy while ensuring that workers are treated fairly and have access to essential services. By prioritizing these efforts, Ethiopia can create a more inclusive economic landscape that benefits both workers and the broader economy as it continues to develop.

EthSwitch has successfully integrated the Ethiopian banking industry into a comprehensive digital transaction system, marking a significant advancement in the country’s financial landscape. Established in 2011, EthSwitch announced during the recent fiscal year that it has connected all banks to its digital platform, playing a crucial role in advancing the National Digital Payment Strategy aimed at fostering an inclusive digital payment ecosystem.

According to EthSwitch’s report for the fiscal year ending 2023/24, the organization achieved notable milestones in facilitating financial service providers within the digital payment ecosystem. Solomon Desta, a board member at EthSwitch, highlighted that one of the key accomplishments this year was the expansion of its interoperability network. By onboarding new participants—including banks, microfinance institutions (MFIs), payment service operators (PSOs), and payment instrument issuers (PIIs)—EthSwitch has enabled seamless integration across various financial services.

Additionally, Solomon noted the progress of the National Payment Gateway, which began its pilot phase at the start of the fiscal year. Following validation by the National Bank of Ethiopia, commercialization approval was granted in May 2024.

During this fiscal year, EthSwitch reported revenues exceeding 1.13 billion Birr, reflecting an impressive 86% increase from the previous year. The organization also generated over 320 million Birr in supplementary income from other sources. Overall, EthSwitch’s total revenue reached 1.45 billion Birr, marking an 89% year-on-year increase.

EthSwitch encompasses all banks in Ethiopia, including the National Bank, and reported a net profit before tax for 2023/24 of over 1 billion Birr, representing a substantial 97% increase compared to the previous year.

Yilebes Addis, CEO of EthSwitch, noted that the company’s paid-up capital exceeded 1.7 billion Birr during the last financial year, contributing to a total of 57 billion Birr. Additionally, EthSwitch facilitated 2.1 million point-of-sale (POS) transactions throughout this period.

The organization aims to enhance interoperability among financial institutions and has successfully made ATMs and POS devices operated by all banks compatible starting in the fiscal year 2023/24. This development is expected to significantly improve the efficiency and accessibility of digital payments across Ethiopia.

Ethiopia is set to enhance its domestic funding capabilities through debt financing via bonds in the Ethiopian securities market. This initiative is part of a comprehensive reform program aimed at restoring macroeconomic stability by modernizing monetary and financial systems and strengthening fiscal capacity.

The National Bank of Ethiopia (NBE) has highlighted that this new approach to capital markets will create significant opportunities for the government. Mamo Mihretu, Governor of the NBE, stated, “Access to debt financing through bonds in the Ethiopian securities market will give the government a new way to boost domestic finance.” He emphasized that avoiding central bank financing of the deficit is a key macroeconomic objective this year, which will help reduce inflation while enabling the government to secure funding from capital markets.

Capital markets are viewed as a reliable source of domestic financing, essential for meeting both long-term public investment needs and short-term deficit financing requirements. The recent Capital Market Summit, organized by the Ethiopian Capital Market Authority (ECMA) in collaboration with the African Development Bank and the International Financial Corporation, took place from November 13 to 15, 2024. The inaugural conference, themed “Paving the Way for Sustainable Development,” aims to accelerate market development and open significant investment opportunities in the region.

The summit was attended by senior government officials, leaders from Ethiopia’s financial sector, and representatives from African and international financial institutions. During the conference, Governor Mamo Mihretu announced the launch of a money market through an online platform managed by the Ethiopian Securities Exchange (ESX). This new platform will enable banks to lend to and borrow from one another using a modern electronic framework.

Mamo reported that this scheme had already been piloted successfully, resulting in over 5 billion Birr in overnight and 7-day maturity transactions among banks within just three days.

Hana Tehelku, Director General of ECMA, addressed previous challenges in issuing and trading financial documents due to a lack of legal frameworks and regulatory bodies. To tackle these issues, new guidelines have been developed based on the Capital Market directive, establishing a legal framework for financial documents available for sale in Ethiopia.

Under these new guidelines, all documents must be submitted to and approved by ECMA before they can be marketed. This includes detailed procedures for registration and stipulations that advertisements related to financial documents can only be broadcast once their content has been reviewed and approved by the authority.

The marketing guide for public offerings outlines essential elements such as customer interest statements that must be made available to investors, presentation processes, necessary licenses, and conditions under which sales and allocations may occur.

As Ethiopia moves forward with its capital market initiatives, stakeholders are optimistic about the potential for increased domestic funding through bonds and improved access to financial resources for public investment. This strategic shift aims not only to stabilize the economy but also to foster sustainable development across various sectors in Ethiopia.