Remittances in Ethiopia

The document analyzes the remittance landscape in Ethiopia, noting a significant discrepancy between World Bank and National Bank of Ethiopia (NBE) inflow estimates. It identifies a high reliance on informal channels, estimated at 65% to 80% of remittance value, driven primarily by an overvalued currency and restrictive foreign exchange controls. The formal sector is bank-led and dominated by a few large players, with limited digital penetration due to the absence of e-money licenses and a lack of a national ID database. Infrastructure challenges, including low electricity and internet access and a basic national payment system lacking a retail electronic funds transfer (EFT) system, further hinder the efficiency of formal transfers. The report recommends implementing a risk-based approach to AML/CFT, legalizing foreign currency exchange at market rates, and developing a comprehensive e-money regulatory framework to reduce informality and costs.

• There is a vast discrepancy in reported remittance inflows for Ethiopia; World Bank 2016 figures showed USD 742 million, while the National Bank of Ethiopia (NBE) estimated private individual transfers for 2016/2017 to be over USD 4.4 billion.
• Informal remittance flows are dominant in Ethiopia, with estimates suggesting between 65% and 80% of remittance value moves through informal systems, often utilizing trade payments or cash carried by acquaintances.
• The Ethiopian Birr is considered severely overvalued, which creates a strong incentive for the use of shadow markets and informal remittance mechanisms over formal channels.
• The formal remittance market is heavily bank-led and restrictive; only local banks are eligible for cross-border services, and non-bank providers must partner with banks, which increases costs and business risk.
• Digital financial infrastructure is underdeveloped, characterized by the absence of e-money licenses for non-bank institutions, a lack of a live national ID database, and a national payment system that lacks a retail electronic funds transfer (EFT) system.
• Physical and technical infrastructure gaps, including electricity access (only 43% of the population) and internet access (4% of the population), increase operational costs and limit the adoption of POS devices and mobile money in rural areas.
• Compliance burdens are high due to the lack of a risk-based approach (RBA) to AML/CFT, leading to disproportionate KYC requirements, such as the insistence on proof of address, which excludes many consumers.
• Undocumented migrants in countries like Saudi Arabia (estimated 750,000) and South Africa (estimated 250,000) are forced to use informal channels because they cannot access formal money transfer services.
• The average cost to send USD 200 to Ethiopia from the USA, UK, Saudi Arabia, or Italy was 6.7% in the second quarter of 2018, which is lower than the sub-Saharan Africa average but above the SDG target of 3-5%.

APA

Cooper, B., & Esser, A. (2018). Remittances in Ethiopia. FSD Africa. https://fsdafrica.org/wp-content/uploads/2025/05/Barriers-study-volume-4-Remittances-in-Ethiopia_November-2018.pdf

Chicago

Cooper, Barry, and Antonia Esser. Remittances in Ethiopia. FSD Africa, 2018. https://fsdafrica.org/wp-content/uploads/2025/05/Barriers-study-volume-4-Remittances-in-Ethiopia_November-2018.pdf.

Wikipedia

{{cite report |last1=Cooper |first1=Barry |last2=Esser |first2=Antonia |title=Remittances in Ethiopia |publisher=FSD Africa |date=November 2018 |url=https://fsdafrica.org/wp-content/uploads/2025/05/Barriers-study-volume-4-Remittances-in-Ethiopia_November-2018.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{cooper2018remittances, author = {Cooper, Barry and Esser, Antonia}, title = {{Remittances in Ethiopia}}, institution = {FSD Africa}, year = {2018}, month = nov, url = {https://fsdafrica.org/wp-content/uploads/2025/05/Barriers-study-volume-4-Remittances-in-Ethiopia_November-2018.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }