By Yinebeb Bahru
I work as a customer service officer at Awash Bank, Ethiopia’s leading private bank. One day, a customer came in to withdraw money and asked me to find his account number. Surprisingly, he had two accounts with different identities.
This is just one of many instances where I have witnessed customers maintain multiple accounts under different identities, underlining the need for a well-organized KYC system.
The current lack of a centralized digital ID system makes it difficult for financial institutions to verify their customers’ identities, leaving them more vulnerable to fraudulent activities, including money laundering.
As Ethiopia’s economy grows, reliable and secure financial systems are crucial. Implementing a digital national ID system can significantly enhance the reliability, security, and convenience of CDD and KYC processes for both government organizations and financial institutions. While the Ethiopian National Bank has issued KYC and CDD regulations, these are insufficient. The absence of a digital national ID card in Ethiopia has resulted in banks being defrauded for millions due to counterfeit ID cards and forged signatures.
A digital national ID system can establish trust frameworks for financial institutions through secure authentication methods, such as biometric checks and encryption algorithms. This provides an added layer of security for both financial institutions and users, ensuring that users’ identities are protected, and the services provided are safe and trustworthy. The federal government has launched a pilot program in collaboration with various organizations, including banks, with the slogan “አንድ ሰው አንድ ነው,” meaning “One person is one!” The National ID Office plans to register up to 70 million citizens by the end of 2032.
In my opinion, the benefits of a national digital ID in Ethiopia are numerous. Firstly, it can provide citizens with a secure and reliable form of identification, allowing them to access public and private services more easily. Secondly, it can help enhance data and transaction security, enabling businesses to confidently conduct digital transactions. Thirdly, it can create a unified platform for identity verification and protection, allowing governments to onboard citizens and businesses. Fourthly, it can increase financial inclusion by providing a secure method of identity verification that can easily be used by banks and other financial institutions as they onboard customers.
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For instance, in India, the Aadhaar digital ID system has been successful in improving financial inclusion, reducing fraud, and streamlining public service delivery. Aadhaar has provided 1.2 billion residents with unique identification numbers and biometric information. This has allowed the Indian government to save over $9 billion by reducing corruption, leakage, and fraud.
The implementation of a centralized digital national ID card in Ethiopia can improve access to public goods such as education and healthcare services by providing an efficient way to deliver these goods equitably. Moreover, it can significantly increase the country’s GDP by 6-8%. This emphasizes the urgency for the Ethiopian government to prioritize implementing a centralized digital national ID card for its citizens.
In conclusion, the absence of a centralized digital ID system in Ethiopia has posed significant challenges for the country’s financial institutions. Introducing a digital national ID system can address these issues by enhancing the reliability, security, and convenience of CDD and KYC processes. The benefits of a national digital ID in Ethiopia are numerous and can significantly improve access to financial services and increase the country’s GDP.
Therefore, it’s high time for the Ethiopian government to take the necessary steps to ensure the security and reliability of its financial systems, and a digital national ID card is a vital component of that effort.
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Yinebeb Bahru is a customer service officer at Awash Bank, and he’s passionate about technology, startups, innovation, Finance, writing analysis, research & development. The writer can be reached at: [email protected].
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