Cash economy, criminality and cash regulation in Ethiopia
| DOI | https://doi.org/10.1108/JMLC-06-2021-0065 |
| Published date | 28 August 2021 |
| Date | 28 August 2021 |
| Pages | 645-655 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Messay Asgedom Gobena,Daniel Gebreegziabher Kebede |
Cash economy, criminality and
cash regulation in Ethiopia
Messay Asgedom Gobena and Daniel Gebreegziabher Kebede
Department of Peace and Security Studies, Institute for Peace and Security Studies,
Addis Ababa University, Addis Ababa, Ethiopia
Abstract
Purpose –This paper aims to examine the contributionof Ethiopia’s cash economy to financial crimes. It
also investigatesthe regulation of cash in the context of controlling crime stemming fromthe cash economy.
Design/methodology/approach –This study relies on primary data generated from 20 interviewees
drawn from the National Bank of Ethiopia, Ethiopian Financial Intelligence Center, selected commercial
banks and law enforcement agencies and document review from government reports, media press and
statutes,as well as secondarydata from online and offline sources.
Findings –The cash-intensive nature of Ethiopia’s economy has enabled a significant amount of cash to
circulate outside of the formal financialsystem. This money is partly to blame for the prevalence of criminal
activitiessuch as cash hoarding, corruption and illicit financialflows. To address the threat of crime posed by
the cash economy, the Ethiopian Governmenthas taken measures such as restricting cash withdrawals from
financial institutions,limiting the amount of cash individuals can hold and demonetizing the banknotes.The
measures enable thebanks to collect the cash circulating outside of theformal financial sector. However, the
effect of these measureson reducing future criminality remains uncertain.Improving the financial inclusivity
of the country, specifically expanding basic financial products to the rural areas, digitalizing the country’s
payment system,raising general financial awareness and establishing a strong financialconsumer protection
framework wouldplay a critical role in reducing future criminality and transformingthe cash-intensive into a
cashlesseconomy.
Originality/value –This paper provides a first-of-its-kind analytical perspective on the contribution of
Ethiopia’scash economy to criminal activity and the adequacyof countermeasures so far taken.
Keywords Financial crime, Cash economy, Cash limit, Cash regulation
Paper type Research paper
Introduction
Ethiopia has a cash-intensive economy, in which almost all market transactions are
conducted in cash. Cash being a “king”inthe country’s economy; services such as education,
health, water, electricity and others provided by formal governmental and non-
governmental institutions are paid in cash. Even government institutions, such as the
Ethiopian Customs Commission,are collecting taxes in the form of cash. As a result, a large
amount of cash circulates outsideof the formal financial system. As of April 2020, more than
113 billion EthiopianBirr (ETB) [1] (which is equivalent to $2.8bn) was circulating outside of
the formal financial system(Muluken, 2020a;Wossenseged, 2020). This money is blamed for
the rife of cash hoarding, corruption,black market exchange, illicit trade (contraband), illicit
financial flows, moneylaundering and posing a security risk to the country.
To combat the growth and spread of financial crimes associated with the cash-intensive
economy, to promote the use ofnon-cash payment instruments and to ensure the safety and
efficacy of the country’spayment system, the Ethiopian Government:
Imposed a limitation on cash withdrawal from financial institutions (National Bank
of Ethiopia [NBE], 2020b).
Cash economy
645
Journalof Money Laundering
Control
Vol.25 No. 3, 2022
pp. 645-655
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-06-2021-0065
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