Minors’ Financial Inclusion in Ethiopia: An Examination of the Legal, Regulatory Framework and the Practice of Commercial Banks
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Date
2020-12
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Addis Ababa University
Abstract
Financial inclusion policies mainly aim at enhancing appropriate formal financial services for the
society. Basic saving account is especially crucial for young minors entering the labor market
and engaging in economic activity. However, the Ethiopian legal framework generally does not
enable minors to own saving bank accounts independently and they can only have a custodial
account with parents or guardians as co-owners until they turn age of majority, eighteen years.
The trend of commercial banks on the other hand shows inconsistence in providing minors
saving account products due to different interpretation of the law. As such, majority of the banks
do not provide and allow minors to open and manage saving accounts products independently,
invoking the minimum legal age requirement and the Know Your Customers (KYC) principle as
main barriers. Nevertheless, various justification calls for an enabling legal framework for
minor’s financial inclusion.
Therefore, this research paper is intended to examine whether the existing Ethiopian legal and
regulatory framework enable minors, particularly working minors, to access basic saving account
products independently. It is also meant to assess the
current commercial banks’ practice in relation to minors’ access to saving account products.
Accordingly, this paper claims that the existing Ethiopian legal and regulatory framework does
not enable minors to access saving account products independently. It also finds out that all but
four commercial banks do not provide minors only owned saving account products by
contending that the law doesn’t allow so.
It further recommends that specific regulation which reduces the legal minimum age minors can
open and manage saving account independently should be introduced and more flexible
identification requirement should be set for minors to own saving account and resolve the current
legal and practical challenges minors are facing to access bank saving account, and also promote
financial inclusion.