Financial sector development and industrialization: lessons and prospects for Ethiopia

Hang Yu and Jiaqi Zhao

China Economic Journal, 2024, vol. 17, issue 2, 300-321

Abstract: A functional and efficient financial sector is essential for the industrial advancement of a nation. In the context of Ethiopia’s rapidly growing economy, this study examines the limitations imposed by its underdeveloped financial sector on the country’s economic advancement and explores viable policy interventions. Characterized by state-owned bank dominance, a scarcity of non-bank financial institutions, and deficient infrastructure, Ethiopia’s financial system perpetuates widespread financial exclusion. This exclusion hinders industrial transformation, stifles local business growth, and narrows financing avenues for foreign entities. Insights from China’s shift toward market-oriented financial reforms and Kenya’s fintech innovations suggest a path for Ethiopia involving clear, gradual reforms. Strategic steps could include diversifying financial institutions, improving financial infrastructure, advancing mobile payment solutions, and adopting more versatile financing methods to address the financial challenges of industrialization.

Date: 2024
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DOI: 10.1080/17538963.2024.2345537

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