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Articles

No. 3 (2020)

SAVING AND CREDIT COOPERATIVE SOCIETIES IN ETHIOPIA: A QUEST FOR COMPREHENSIVE LAWS

  • Yimer A. Gebreyesus
Submitted
August 23 2025
Published
23-08-2025

Abstract

Formal cooperatives were introduced in Ethiopia by employees ofthe Ethiopian Road Authority and Ethiopian Airlines in early 1950.Since then,saving and credit cooperatives are one of the most common kinds of cooperatives in Ethiopia.However, saving and credit cooperatives cannot be considered champions in facilitating access to finance for people,mainlydue tolack of innovation, networking among themselves, limited product varieties offeredto their members,and lack of a comprehensive legal framework that supportstheir development. Well thought-outlaws that provide the required confidence for members and other stakeholdersare vital for the development of cooperativesin the country. However, in Ethiopia, there are nolaws thathave beenspecificallydeveloped to regulate saving and credit cooperatives, otherthan ageneral mention in the cooperative laws that focus on other forms of cooperatives. Ethiopiancooperative laws do not provide detailed provisions in relation to saving and credit cooperatives. This articleargues that Ethiopia should introduce a legal framework that providesclear guidelineson important issuesthat are currently left unaddressed by the CooperativeSocietiesProclamationNo. 985/2016to maximize the financial, social and economic benefits from saving and credit cooperatives. Ethiopia is one of the poorest countries in the world with alarming rate of financial exclusion. Access to finance is critically limited in the country and only a few privilegedgetaccess to credits from formal sources. The majority of the people get loans from the informal credit markets at exorbitant interest rates. Saving and credit cooperatives therefore, with appropriate legal and policy frameworks, can be part of the solution tocurb the problem of financial exclusion of the majority of the people.

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