If a 15-year-old Ethiopian Can Work, Why Can't They Open a Bank Account or Get a SIM Card Independently?

Ethiopia is at a critical stage in its journey towards digital transformation. With a growing young population and ambitious goals for financial inclusion, it's time to reconsider current rules that prevent young people from accessing essential services. 

The current regulatory framework requires individuals to be 18 or older to open a bank account or obtain a SIM card on their own despite the legal employment age being 15. While these rules aim to protect minors, they also create unnecessary barriers to financial inclusion and digital adoption. Around 5 million people in Ethiopia are between the ages of 15 and 17, highlighting the significant untapped potential of the age group. Moreover, with the last population census indicating a median age of 19, and an estimated two to three million people entering the workforce each year, policy reforms around the minimum age for bank account and SIM card ownership could set an important precedent for future generations.

Current Ethiopian regulations, such as the Anti-Money Laundering and Terrorism Financing Proclamation No. 1176/2020 and the SIM Card Registration Directive No. 799/2021, explicitly set the age of independent access to these services at 18. While minor savings accounts and SIM registrations for under-18s are possible, they invariably require a parent or legal guardian to act as the primary account holder. This approach, though well-intentioned, clashes with other crucial aspects of Ethiopia's legal and socio-economic landscape and holds back the potential of young adults who have the actual use case and needs for such services.

Old Enough to Work, Too Young for a Bank Account?

Ethiopia's Labour Proclamation No. 1156/2019 recognizes individuals from 15 years of age as eligible for employment, albeit with restrictions on hazardous work and working hours. This means that a 15-year-old in Ethiopia can legally earn an income, yet they are systematically prevented from independently managing that income through a formal bank account or even accessing digital communication through their own registered SIM card. 

This disconnect, which arises from opposing treatments in different regulations, is more than just a bureaucratic anomaly; it's a crippling barrier to financial access and digital inclusion for millions of young adults. Ethiopia is home to millions of youngsters between the ages of 15 and 17, of whom a significant proportion are actively engaged in self-employment, informal labor, or other income-generating activities. From small-scale trading or services to agricultural labor, these young entrepreneurs and workers are at a minimum contributing to their families' livelihoods, if not fully financing their own lives. Denying them direct access to formal financial tools forces them into informal, less secure, and often more expensive channels for saving, sending, or receiving money. At the very least, they have bills to pay, whether it’s for transport, groceries, or funding their academic pursuits.

These are precisely the individuals who could be early adopters of digital financial services, given their growing access to mobile phones and the potential for financial technology to bridge geographical distances. However, asking their parents or guardians to facilitate account opening or SIM registration often presents insurmountable obstacles. A significant portion of rural parents may themselves be unbanked, lack the necessary financial literacy to navigate banking procedures, or simply not possess the required identification documents. This creates a bottleneck that prevents many deserving young people from accessing modern financial tools.

Furthermore, the realities of internal migration in Ethiopia add another layer of complexity. Hundreds of thousands of young adults migrate from rural areas to cities in search of job opportunities. These young migrants are often far from their parents or immediate family members, making the "guardian" requirement practically impossible to fulfill. Without a local guardian or close relative to vouch for them, these economically active young people are stuck in a precarious situation. They cannot open bank accounts to safely store their earnings or register SIM cards in their own names, barriers that cut them off from staying in touch with family, accessing information, or using mobile money services that are increasingly essential for life in the city.

Leveraging Digital ID for Secure Empowerment

Concerns around Know Your Customer (KYC) procedures, such as the reliability of school IDs or the lack of more common Kebele IDs for those under 18, are valid. However, the ongoing rollout of Ethiopia's National Digital ID (Fayda) offers a robust and transformative solution. Digital ID can facilitate a secure and streamlined KYC process for these younger individuals, verifying their identity reliably and efficiently. This eliminates the need for potentially less reliable physical documents and addresses concerns around fraud or misuse.

Of course, allowing younger individuals direct access should come with sensible safeguards. There could be limits on transaction amounts, account balances, or specific features like loans to protect against abuse, misuse, or other possible risks. A 17-year-old should not be permitted to transact 20 million Birr, as such a large transaction may be linked to money laundering or potential exploitation by someone older. This risk-based approach, combined with financial literacy education, would empower young adults while mitigating potential downsides.

As Ethiopia progresses towards realizing its Digital Ethiopia ambitions and specific goals around financial inclusion or digital payments, it’s also time to align the existing policies and legal framework in a way that leverages our demographic dividends, which is delaying the inclusion of millions of Ethiopians into the formal digital and financial access every year.  By lowering the age for independent SIM card and bank account access to 15, underpinned by the secure framework of Digital ID and appropriate safeguards, Ethiopia can accelerate financial inclusion of the young, enhance digital literacy, and empower its next generation to thrive in an increasingly connected world.