An Overview on Triumphs and Impediments of Ethiopia’s Informal Financial Actors

Abstract

The article assess the roles that have played by Informal financial Institutions (also known as ‘‘Microfinance Institutions’’) to improve the life condition of the poor in Ethiopia so far, and to identify the obstacles that hinder these intuitions. These institutions are thought to be best possible alternatives for those people who can’t get an access to the other alternative in the financial market, mainly Banks and Insurance companies. In most cases, Banks, Insurances and other formal financial institutions failed to address the financial needs of the poor. Furthermore, these institutions are crucial to combat poverty, diminish idleness, and empower females and other disadvantaged segments of the public. Despite successful stories, these institutions are suffering from challenges like lack of sufficient skilled man power, unable to equip with updated technologies, limited service provision, structural, policy and regulatory challenges, and limited geographical coverage. The study concludes that notwithstanding numerous hindrances, Ethiopia’s informal financial sector is playing significant role in the financial market, and improve the life conditions of hundreds of thousands of poor. And, these institutions have the potential to lead the financial market of the country if they expand their service areas and geographical coverage, equip with updated technologies and skilled man power.