Financialisation and development: a case study of Ethiopia

Purpose This paper aims to shed light on financial development in Ethiopia and its implications for overall economic development. It does so with particular focus on development understood as industrial development and with special attention drawn on inequality and debt levels as well as the real estate market in Ethiopia. Two research questions are focussed on in particular, where the first serves as prerequisite for the assessment of the second: What kind of financial development took place in Ethiopia in the past quarter of a century? Furthermore, are processes of financialisation visible in Ethiopia, and if so, to what effect? Design/methodology/approach The paper is based on publicly available macro-data and qualitative and quantitative data collected by the author herself during a three months’ research stay in Ethiopia. Findings It is found that despite higher levels of financial inclusion and deepening, industrialisation is on a relative decline. What is more, inequality and debt levels increase, and the recent growth spurts seem to be rooted in the construction sector with prices in the real estate market surging. In can be concluded that despite a flourishing financial sector, the Ethiopian economy is faced with the peril of crises associated with an inflated real estate market, inequality, debt burdens and impeded industrialisation. Originality/value African economies and, in particular, the development and effects of financial markets are still a blind spot in economic research. By combining quantitative and qualitative data on and gathered in Ethiopia, this paper therefore conducts greenfield research.