The Growth Effect of Disruptive Technology in Ethiopia: With a Case Study of Digitalization in the Financial Sector
African Economic Research Consortium
Focusing on digitalization as a major disruptive technology in Ethiopia, this study found that digitalization is at a very low level of development in Ethiopia, by regional standard. Yet, a 10% rate of digital penetration (digitalization) is found to increate GDP growth by 0.5%―this being as high as 0.8% in the service sector. Digitalization in the financial sector is growing very fast, but is still the lowest by regional standard. Major challenges for this are found to be the stifling regulatory environment from the central bank, the telecommunication infrastructure (though significantly improved lately) and the low level of digital literacy both at national level and within the financial sector. Low investment from the board of directors of banks so as to pay high dividend, failure of executives to take risk to creatively use the IT capacity in the country, the difficult of measuring the impact of digitalization for use in board and executive decision-making, and coordination failure in collectively acquiring some digital technologies from global vendors at national level are some of the challenges identified in the sector. Based on these findings, the study derived various policy implications that include: strengthening the regulator body and improving its working modality; acquisition of some digital technology at national level; and improving the digital infrastructure, cost and reliability; among others.