Can Transforming Workplace Groups into SACCOs Make a Difference in Ethiopia’s Financial Landscape?

In a country like Ethiopia, where social values are deeply rooted, workplaces have long been infused with community norms. Whether it’s hosting coffee ceremonies after holidays, wearing cultural attire on special occasions, or forming socio-religious groups like Mahibers, many offices resemble close-knit families.

But these traditions extend beyond the social sphere. Traditional rotating savings and insurance groups, such as Equb and Edir, are common across both private and public institutions. These associations provide social support, offer relief and welfare benefits, and foster solidarity among employees.

At present, many such groups and informal associations focus mainly on providing small relief funds for employees in times of crisis, organizing social events, or offering basic welfare programs. However, these groups have the structure and trust base to do far more if leveraged strategically. Given their existing relationships with employees, workplace associations could evolve into financial cooperatives that offer savings, small loans, insurance, and even investment opportunities.

Financial inclusion in Ethiopia remains a significant challenge, with just 49% of the population having access to financial services as of 2025. This is still much lower than neighboring countries like Kenya (around 83%) and Rwanda (77%), and the Sub-Saharan Africa average (55%). The gap ranges from 6% in the Somali region to 75% in Addis Ababa, with a 19% gender disparity. Despite government efforts, development partners, and investments in digital finance services (DFS) and microfinance, many Ethiopians, especially in rural areas, remain excluded from formal financial systems and rely on informal methods for saving and borrowing.

While various strategies have been proposed and implemented by different actors, one promising solution that remains untapped is the country’s growing network of employee associations/groups. Transforming workplace associations into financial cooperatives, such as Savings and Credit Cooperatives (SACCOs), can bring affordable financial services.

In Ethiopia, SACCOs serve as a network of community-based financial institutions that provide savings and loan services to members, aiming to support their economic development, particularly in rural areas. They are a significant part of the financial system, with over 21,000 primary SACCOs and over 5 million members as of 2021.

These cooperatives are widely recognized in many developing economies, including in Sub-Saharan Africa, as a tool for financial inclusion, particularly in rural areas where traditional banks are not available.

Forming a SACCO in Ethiopia requires only 10 members. A 2023 study by the Ethiopian Economics Association estimates that over 200,000 businesses in the country have 10 or more employees, many of which already host informal employee groups such as Equbs. These associations are an underutilized asset in the pursuit of financial inclusion. Workers already trust these groups because they are rooted in shared socio-economic experiences and the familiarity of the workplace.

Transforming employee associations into SACCOs could therefore provide a practical pathway to inclusion. Workplace-based SACCOs are community-driven and tailored to the needs of their members. Employees could save regularly, access low-interest loans for personal or business purposes, and even benefit from group insurance. Their proximity and existing trust networks help eliminate common banking barriers. Research shows that SACCOs can achieve financial sustainability while expanding outreach, though growth rates vary across regions.

These cooperatives can also play a key role in formalizing informal savings groups that already exist across Ethiopia. By integrating Equbs and similar associations into the formal system, SACCOs can make savings safer, more transparent, and scalable. Formalization also protects members from risks like mismanagement while enabling access to larger funding sources, such as government incentives or international finance programs.

There are success stories of SACCOs in Ethiopia, which began through workplace friends. Take Awach (አዋጭ) SACCO, which began with 41 members and has succeeded through steady membership expansion, job creation, and capital growth. Now, they have over 25 branches across Ethiopia, disbursed over 20 billion Birr ($140 million), and have over 160k members.

Looking beyond Ethiopia, Kenya's Stima SACCO provides a compelling model. Initially formed in 1974 by employees of the East African Power & Lighting Company (a workplace association), it has grown into one of the country's largest SACCOs, serving hundreds of thousands of members with savings, loans, and insurance tailored to energy sector workers. This transformation not only boosted financial inclusion among informal and semi-formal workers but also generated employment, with SACCOs across Africa creating marketing opportunities and better profit margins for members.

In another Kenyan example, a union-led SACCO launched in 2023 for private security workers, many of whom are from informal associations, has quickly mobilized savings and provided emergency loans, reducing reliance on high-interest moneylenders.

These use cases illustrate a key argument: workplace-rooted SACCOs work because they build on existing social capital. Members trust the groups more than distant banks, leading to higher participation rates—up to 100% growth in savings within a single year in some Ethiopian rural SACCOs. For women, organizations like WISE in Ethiopia have transformed employee and community associations into SACCOs since 1998, achieving an 82.5% success rate in loan repayment and empowering thousands through business skills training. This not only closes gender gaps but also aligns with broader economic goals, as SACCOs have become major employers in informal economies across Kenya, Tanzania, Uganda, and Ethiopia.

The idea of transforming workplace associations/groups into SACCOs is not without challenges, but it is a feasible solution to explore. One of the main hurdles is regulatory compliance. While Ethiopia has a legal framework for SACCOs under Proclamation No. 147/1998, many workplace associations lack the knowledge or resources to comply. They would need technical support and training to understand how to manage finances responsibly and stay compliant with the law.

Moreover, the government could play a critical role in supporting this initiative by offering more incentives for companies to set up SACCOs and by providing a regulatory framework that facilitates their growth. Development partners could also contribute by offering capacity-building programs to strengthen the management of these financial cooperatives. These types of groups are already aligned with the National Bank of Ethiopia's (NBE) Financial Inclusion Strategy (NFIS, 2021-2025) and the National Agri-Finance Implementation Roadmap (NAFIR, 2025-2030), which emphasizes leveraging cooperatives and rural financial institutions to expand access. The strategy explicitly supports formalizing informal mechanisms and using community-driven models to reach the unbanked, making workplace SACCOs a natural fit.