Financial Services Market Assessment in Dolo Ado, Ethiopia
The Dollo Ado and Bokolmanyo districts of the Somali regional state of Ethiopia are host to over 160,000 refugees, located in five camps and adjacent host communities. The area, which borders Somalia and Kenya, is predominantly rural and underdeveloped. The principle sources of livelihood for both the refugee and host community are characterized by pastoralism, agro-pastoralism, and small-scale retail businesses. Refugees and host community populations share common religious, cultural, and linguistic heritage and live peacefully alongside each other.
Financial inclusion plays an important role in poverty reduction. Due to the remoteness of the Dollo Ado and Bokolmanyo refugee camps, most refugee and host community populations lack access to financial
services. Despite the nascent development of the financial services sector, access to financial services remains critically low. Only less than 1 percent of the refugee adult population have access to loan services, whereas the corresponding numbers for savings services are higher at nearly 7 percent.
This assessment finds that, although there is high demand for loans from various business groups in the camps, this demand is currently underserved by the existing formal financial institutions. The donorfunded Dedebit microfinance program, launched in 2017, is the first initiative to offer loans for refugees and host communities, whereas Somali Microfinance, Oromia International Bank, and the Ethiopian Commercial Bank only have a few loan clients. In a more flexible form, NGOs operating in the area have recently supported the creation of informal village savings and loan associations (VSLAs), to help refugees and their host communities pool their savings and gain financial confidence before reaching out to formal financial institutions. In addition, people also engage in similar self-help savings and credit groups, and informal financial mechanisms, such as borrowing from family, friends, traders, wholesalers, and input suppliers.
This study shows that the financial services sector is at an early stage of development in Dollo Ado and Bokolmanyo. The first commercial bank, the Commercial Bank of Ethiopia, was established in Dollo Ado \ town in 2012 and in Bokolmanyo in 2019. The second commercial bank, the Oromia International Bank, opened a branch office in Melkadida in 2019. In addition, with the support of UNHCR, the first microfinance institution, the Dedebit MFI, opened branches in the Dollo Ado and Bokolmanyo refugee camps in 2017 and was followed by the opening of the Somali Microfinance Institution in Dollo Ado in 2018 and in Bokolmanyo in 2020.