The National Bank of Ethiopia (NBE) has announced plans to expand its regulatory reach to parts of the country’s “shadow” financial sector, in a move aimed at reducing systemic risks and creating a more level playing field in the financial market.
Speaking at the 13th International Microfinance Conference in Addis Ababa, NBE Vice Governor Solomon Desta said Savings and Credit Cooperative Societies (SACCOs) and pension funds will soon face stronger central oversight. He said the current regulatory gap is no longer sustainable as some SACCOs have grown into major financial actors and now compete with licensed financial institutions.
For years, Ethiopia’s financial system has operated under a divided structure. Commercial banks and microfinance institutions are closely supervised by the NBE, while SACCOs and large pension funds have remained under fragmented or indirect oversight despite managing substantial assets. According to Solomon, this imbalance has created room for regulatory arbitrage, where institutions operating under lighter rules gain an advantage over more heavily regulated players.
Officials and industry experts warn that weak oversight could expose the economy to broader shocks, particularly if a large SACCO or pension fund faces liquidity problems. The NBE also plans to push for stricter supervision of pension funds, including investment guidelines, actuarial oversight, and transparent reporting.
The central bank is working with the Ethiopian Cooperative Commission on ways to bring SACCOs into the regulatory framework without undermining their social role. Experts say implementation will require strong digital systems, human capacity, and careful execution to avoid limiting financial access for low-income communities. The reforms come as Ethiopia’s financial sector faces rising competition from foreign banks and fintech firms.
Source: Capital Ethiopia Newspaper
