Although savings have increased in Ethiopia, access to loans remains an unresolved issue.
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Ethiopia’s population of more than 120 million people had a combined deposit of nearly 3.38 trillion birr across 31 commercial banks as of May 2025. That’s an average deposit of 28,000 birr per person. Of course, considering banking penetration and other factors, the average could be much higher.
For a population that’s battling inflation and a weakened currency, these numbers are not so bad. This gives banks a concentrated amount of capital they can disburse through loans. However, access to consumer loans and credit is extremely low in Ethiopia. Aside from low access, loans are often distributed unequally, as the majority of Ethiopia’s loans are held by a few hands. This has created a major hindrance to wealth creation in Ethiopia.
What the Numbers Say
By mid-2024, Ethiopian banks had lent out about 2.2 trillion birr, while total savings in the banking system reached around 2.5 trillion birr. A few years earlier, these numbers were lower; loans were approximately 1.9 trillion birr, and savings around 2.2 trillion birr. Bank lending rates (the cost of borrowing) used to be around 16–17%, but as money in the system became tight, some banks started charging up to 23%. Inflation, which has stayed close to 20 %, means that even though people pay high interest, the real value of money they borrow or save keeps changing.
Even with all this money in the system, most Ethiopians can’t easily get loans. A tiny group (about 0.5 % of borrowers) takes nearly 75 % of all the bank loans. Sectors like farming, which employ most people, get only about 6 % of the total credit.
There is also the issue of credit caps. Credit cap refers to the amount of money banks are allowed to lend from their deposits. The National Bank of Ethiopia raised the credit cap to 24% in September 2025, but banks are not satisfied. According to the banks, the credit cap must be done away with entirely because it restricts their ability to grow their loan books and serve more customers.
One can argue that the credit cap has somewhat contributed to the shortage of loans in the country. But in reality, high interest rates, tough collateral rules, and rising inflation make it hard for ordinary people and small businesses to borrow. So, while the total amount of lending is large, access to loans is still limited for most Ethiopians.
Why Loans Are Necessary
Most people can’t simply pull a huge sum of money out of their own pockets. Whether it’s to buy a house, start or grow a business, or (on a much larger scale) for governments and institutions to fund infrastructure projects, loans provide the immediate cash needed to turn plans into reality. In other words, credit is what keeps economic activity moving. When loans become scarce or hard to access, that flow of growth slows down.
But the issue isn’t just about a shortage of loans; it’s also about who gets them. When lending is unevenly distributed, with most of the money going to a small group of large borrowers, the consequences ripple through the economy. Small businesses struggle to expand, job creation slows, and everyday people find it harder to finance homes or other asset purchases. So when we talk about credit inequality, we’re really talking about unequal access to opportunity and economic growth. Even if the Ethiopian economy grows, that growth will be concentrated among a few individuals and institutions while the rest of the population languishes in poverty.
Ethiopia’s deposit growth hints at a positive potential, i.e., Ethiopians are making money. To capitalize on this energy, Ethiopians need more equitable loan access. Doing so will have immense returns both in the short and long run. Efforts like raising the credit cap hint towards a positive direction, but they’re only the first step. Broader steps are needed to ensure that everyone (not just big companies) gets a slice of the loan pie.
