Ethiopian Banking Sector Development

Abstract

Financial development is comprehensive term that represent the structure, size, accessibility and efficiency of financial intermediaries. Each of this element of financial development is measurable. This paper deals with the structure of Ethiopian financial system, and size, accessibility, efficiency and concentration of the banking sector in particular. These dimensions of Ethiopian banking sector measured using ratio of private sector credit to GDP, demographic and geographic distribution of banks’ branches, interest rate spread, concentration ratio and Herfindahl-Hirschman index. As the result of the analysis show Ethiopian banking sector was shallow, less inclusive and highly concentrated.

Keywords: Ethiopian banking sector, concentration ratio, Herfindahl-Hirschman index.