Accion is supporting Dashen Bank to build an innovation hub that aims to expand digital banking services to micro, small, and medium enterprises (MSMEs) through a range of new products and a focus on women-owned businesses.

Ethiopia’s nearly two million MSMEs are important drivers of its economy, yet only 6% of microenterprises and 1.9% of small enterprises have access to formal credit. The financing gap in the MSME sector of the country is estimated to be $4.2 billion. 

Unemployment, low incomes, and a lack of financial education remain key reasons for a lack of access to formal financial services. 

Again, only 39% of women — compared to 55% of men — have an account at a formal financial institution, preventing them from accessing the evolving digital financial ecosystem and contributing to the country’s economic growth.

Dashen Bank has long been at the forefront of introducing innovative digital financial products and services in Ethiopia. It was one of the first banks in the country to launch a digital wallet, which helps small business owners make frictionless transactions. 

Now, with the new innovation hub being built with Accion, the bank aims to develop new solutions, embedded in existing supply chains for MSMEs in Ethiopia that still largely transact in cash, have few assets, and as a result, remain largely invisible to big banks. 

The innovation hub is one of the strategic pillars of the Bank’s sixth strategy plan designed to enhance its capacity to support MSMEs. This move is aimed at driving financial inclusion and fostering economic development through innovative digital solutions.

Asfaw Alemu, chief executive officer at Dashen Bank shared, “Despite their critical contribution to the country’s economic growth, small businesses, particularly those led by women, face significant financing challenges. This is largely due to high reliance on cash-based transactions leading to insufficient formal financial records of their business operations and women’s lack of ownership over assets to meet collateral requirements. 

“Through this partnership, we seek to address these challenges, build our operational capacity, enhance our credit offerings to meet the needs of small business owners, and develop a range of digital products and value propositions to help them access the resources they need to grow their businesses successfully. This landmark project underscores our commitment to staying always one step ahead, further cementing our reputation as an industry leader in Ethiopia’s financial sector.”

According to Yohannes Million, chief digital and information officer at Dashen Bank, “Our innovation hub aims to serve as a catalyst for empowering MSMEs by providing them with tailored digital banking solutions. Based in a dedicated facility, it will drive change as a platform where technology and financial services intersect to fuel progress and improve operational efficiency for our customers.”

Through strategic partnerships with those supply chains, Accion will help Dashen develop new products designed for MSMEs, using AI to crunch new types of data and develop new credit scoring models that are better suited to the realities of MSMEs, including those that are women-owned. 

Backed by this new data and extensive research, the innovation hub will build solutions such as credit from their existing suppliers via embedded finance products, and non-financial tools, such as business management support.

Dashen Bank has recently issued a tender to initiate the construction of this forward-looking facility. The innovation hub represents another bold step by the bank toward transforming Ethiopia’s banking landscape, demonstrating its unwavering commitment to harnessing the power of technology to drive progress and support economic empowerment. 

As part of its future roadmap, Dashen Bank will organize an innovation workshop for its leadership and staff, which will explore opportunities in cutting-edge technologies, including artificial intelligence, in collaboration with a globally recognized technology partner.

Raliat Sunmonu, vice president, Middle East and Africa, Accion Advisory said, “Ethiopia is one of Africa’s fastest-growing economies, and small businesses play a vital role in propelling its growth. 

“Through this collaboration with Dashen Bank – a leader in financial innovation – and other strategic partners, we are helping build a more inclusive ecosystem for MSMEs in Ethiopia. Together, we can deploy artificial intelligence and other tech tools to help remove bias and other roadblocks faced by micro, small, and medium enterprises, especially those led by women.”

Subhashini Chandran, senior vice president of Social Impact for Asia Pacific, Europe, Middle East and Africa, Mastercard Center for Inclusive Growth said: “Ethiopia is at a pivotal point in its journey to drive economic growth through inclusive and relevant services for micro and small businesses. Digital financial services are a critical component of that journey. 

“For the last decade, the Mastercard Center for Inclusive Growth has been working to advance financial inclusion around the world. We are excited to partner with Accion and Dashen Bank to develop inclusive financial services that can support the growth and resilience of small business owners in Ethiopia.”

This initiative is part of Accion’s 8-year partnership with the Mastercard Center for Inclusive Growth that supports the transformation of financial service providers, digital platforms, and fintechs, and aims to help 23 million people across 25 countries benefit from the digital economy.

“Closing the uptake gap would increase the continent’s potential to create jobs for its growing population and boost economic recovery in a highly digitalized world.”

According to the World Bank, “on average across countries in Sub-Saharan Africa, 84 percent of a given country’s population had at least some level of 3G mobile Internet availability, and 63 percent had some level of 4G mobile Internet services, but only 22 percent were using mobile Internet services at the end of 2021.”

Digital Technologies

In its report titled “Digital Africa: Technological Transformation for Jobs,” released on Monday, the World Bank noted that Africa’s jobs challenge is to put in place business environments conducive to sustainable “good jobs” for its growing workforce.

It noted that Continental Africa’s workforce is estimated to triple by the twenty-second century—from almost 875 million working-age people (ages 15–64) in 2025 to over 2.5 billion by 2100 (UN DESA 2022a).

As a result, the bank noted that Africa’s share of the global workforce would increase from 16 percent to over 41 percent, surpassing South Asia, East Asia, and the Pacific for the largest global share by 2100.

The report said this increase is overwhelmingly led by Sub-Saharan Africa, whose workforce is projected to more than triple, from just over 700 million people in 2025 to 1.3 billion by 2050 and 2.3 billion by 2100.

Meanwhile, it said North Africa’s working-age population is projected to almost double, from 142 million to 203 million people.

According to the World Bank, Africa’s job and technology challenges over the coming years are immense, requiring greater use of better and more appropriate technologies in ways that support good local jobs.

It stressed that good jobs require productive enterprises that can profitably expand production, adding that the challenge of the job presents opportunities for enterprises, households, governments, and civil society at local, national, and regional levels to do things differently and better.

The report said demographic, technological, and market developments provide prospects to design and implement productivity policies and investments that generate jobs-for-all growth and truly shared prosperity.

The report said that with Africa’s share of the global workforce projected to become the largest in the world by 2100, African countries must increase the uptake of digital technologies to drive employment growth for the more than 22 million Africans joining the workforce each year.

The report, which was prepared in support of the World Bank’s Digital Economy for Africa Initiative, examined pathways to produce and promote the expanded use of affordable and attractive digital technologies that are appropriate for Sub-Saharan Africa’s growing workforce and facilitate continued learning through their use.

The World Bank noted that digital technologies have emerged as an essential element of a good jobs strategy for African countries.

To this end, it said: “Africa needs more activist policies that promote the use of digital and complementary technologies, especially affordable, attractive, skill-appropriate technologies that support productive and inclusive jobs.”

“Such policies must target all potential users’ ability to pay for these technologies as well as their willingness to productively use them.”

To boost productive usage, the report urged governments to implement policies that support the development of more attractive digital solutions geared to the skills and productive needs people have while building broader awareness and education.

“Policies that foster innovation and support digital start-up entrepreneurs are essential to ensuring that more Africans use the Internet for jobs and learning, which will lead to higher standards of living.”

“When digital technologies better meet the needs of people, households, and firms, demand for their use will also increase, making Internet expansion more commercially viable and supporting a virtuous cycle of technology-led transformation,” it noted.

Further, the report called for an expedited approach to close the digital divide gap on the continent, saying that of all the regions in the world, Sub-Saharan Africa displays the largest gap between the availability of digital infrastructure and people’s actual usage.