Ethiopia’s Cash Economy Contributes to Financial Crimes: Study Finds

A New Study Reveals the Significant Role of Ethiopia’s Cash-Intensive Economy in Facilitating Financial Crimes

Addis Ababa - A recent study by academics Messay Asgedom Gobena and Daniel Gebreegziabher Kebede from Addis Ababa University has shed light on the link between Ethiopia’s largely informal financial sector and the prevalence of cash hoarding, corruption, and illicit financial flows. The research highlights the significant role that Ethiopia’s cash-intensive economy plays in facilitating financial crimes.

Cash Economy Enables Criminal Activities

According to the study, which relied on primary data from government reports, media press, statutes, as well as online and offline sources, a substantial amount of cash circulates outside of the formal financial system in Ethiopia. This has created an environment conducive to criminal activities, including money laundering and terrorism financing.

Government Efforts to Address the Issue

The Ethiopian Government has taken steps to address the issue by:

• Restricting cash withdrawals from financial institutions
• Limiting the amount of cash individuals can hold
• Demonetizing certain banknotes

However, the study’s authors caution that the effectiveness of these measures in reducing future criminality remains uncertain.

Recommendations for Combating Financial Crimes

To combat financial crimes effectively, the researchers recommend:

• Improving financial inclusivity in rural areas
• Digitalizing payment systems
• Increasing general financial awareness
• Establishing a strong financial consumer protection framework
• Regulatory bodies being more proactive in monitoring and addressing suspicious transactions

Implications for Policymakers and Regulators

The study’s findings have significant implications for policymakers and regulators seeking to tackle financial crimes in Ethiopia. The authors’ recommendations offer a roadmap for transforming the country’s cash-intensive economy into a more formal, digital, and transparent system.

Published Research Highlights Urgent Need for Regulatory Action

The research is published in the Journal of Money Laundering Control and highlights the urgent need for regulatory bodies to take a proactive approach in addressing the root causes of financial crimes in Ethiopia.