Structure and Trends of Financial Development and Sectoral Growth in Ethiopia

Abstract

Ethiopian economy had passed through different regimes and, hence economic policies had formulated differently. As a result, national economic policies were set in line with the respective regime’s political ideology as policies are directed with the intention of achieving a wide range of macroeconomic goals. Throughout all regimes, the major financial institutions operating in Ethiopia are banks, insurance companies, and microfinance institutions and the financial sector of the country shows a slightly on the way of growth but the performance of the financial sector of Ethiopia as compared to other middle-income African countries shows the need for more improvement which show  still weak financial system which manifested in high government regulation and dominance of the government-owned commercial bank in terms of holding  assets, savings mobilization, and loans disbursement. Following different economic policies set by different regimes, on average, the service sector has contributed increasingly and agricultural sector decreasingly contribute to economic growth while until implementation of Growth and Transformation plan I, industry sector showed a slow trend in contribution to economic growth In line with surprising economic growth registered last one decades, the financial system in Ethiopia has also improved following rapid growth in the number of participating institutions including the scope and services rendered in which the system comprises the regulatory authorities, banks, non-bank financial institutions.

Keywords: financial development, sectoral growth, Private credit to sectors, Ethiopia

DOI: 10.7176/DCS/10-8-01

Publication date:August 31^st 2020