Digital Financial Services and Informal Economy in Ethiopia

This key report, produced by Shega as part of the AKOFADA project, examines the adoption of digital financial services (DFS) in Ethiopia’s informal economy, which employs over 90% of the workforce and contributes a third of GDP, yet remains largely excluded from formal finance. 

Despite the rapid growth of DFS, informal workers continue to rely on cash and community-based savings groups. According to the survey conducted by Shega, the following factors have contributed to this gap: strict KYC requirements, high fees, low digital and financial literacy, poor connectivity, limited access to devices and electricity, low trust, and irregular incomes. The report analyzes these structural and behavioral challenges while highlighting enabling initiatives, including the National Financial Inclusion Strategy, the National Digital Payment Strategy, and the rollout of the national digital ID (Fayda). 

It provides actionable recommendations, emphasizing tailored low-cost financial products, expanded agent networks, targeted literacy and awareness campaigns in local languages, trust-building mechanisms, and coordinated multi-stakeholder approaches. By addressing these systemic barriers, DFS can evolve beyond basic payments to facilitate savings, credit, and broader financial empowerment, improving livelihoods, resilience, and the gradual formalization of Ethiopia’s informal economy, while supporting national goals of inclusion, poverty reduction, and sustainable economic growth.