The Application

The subject line hit like a blow: Public Trust Licensing Framework.  Alemayu scanned the directive once, then again. It was unmistakably real: from now on, no bank in Ethiopia could accept a single birr in deposits without a Public Trust License.

The application was two hundred pages of dense clauses, annexes, and declarations. Not a form—an interrogation.

The requirements were blunt:

Demonstrate Community Benefit: To collect deposits from a district, a bank had to prove that 80 percent of its lending flowed back to that same district. Fail to meet this “geographic alignment,” and the application was rejected.

Provide Institutional Collateral: Banks were required to pledge physical assets—headquarters, branches, vehicle fleets—into a pooled fund that could be seized and liquidated if they failed depositor obligations.

Submit Character References: Two hundred testimonies from depositors across income levels, each confirming two years of faithful service. Any missing ID documentation invalidated the statement.

Pay the Application Fee: A non-refundable 50 million birr for “verification and audit procedures.”

Incomplete applications were discarded without review.

For weeks, branch managers and compliance teams became archivists of their own existence—assembling audited statements, mapping “community benefit,” photographing buildings, collecting sworn depositor declarations.

On submission day, a silent queue stretched outside the National Bank. Alemayu stood among representatives from rival institutions, each holding a box containing their bank’s life story in triplicate.

For decades, banks had demanded collateral, proof of income, and character references from every household and small business seeking credit. Now the system had turned its own methods inward.

There was no appeal, no negotiation. There was only the application.

The Rejections

The results appeared without warning: a single PDF uploaded to the National Bank’s website at 9:47 a.m. By noon, the industry stood still.

Out of all the commercial banks in the country, only one received a provisional Public Trust License. Every other institution received the same verdict: Application Denied.

The reasons were listed in terse, bureaucratic lines:

Awash Bank— Rejected: “Over-concentration of depositor exposure.” More than half its deposits came from 0.5% of clients. The NBE deemed this “systemically unsafe” and proof of “insufficient distribution of trust.”

Dashen Bank— Rejected: “Inadequate community embeddedness.” Its loans were “operationally sophisticated but socially remote from target districts.”

Bank of Abyssinia— Rejected: “Weak enforcement capacity.” Recovery mechanisms were “too slow and too costly to safeguard depositor funds.”

Others failed for reasons so technical they felt surreal: Insufficient geographic benefit alignment, Incomplete testimonial diversity; Unverifiable pledged assets, and Benefit footprint mismatch.

Some were rejected for missing signatures. Others because testimonial letters came from the wrong kebeles. A handful because their “community-benefit maps” did not meet new formatting standards. By the end of the workday, 99.5 percent of the banking sector was legally barred from accepting new deposits.

Banks issued statements expressing “surprise” and “concern.” None of it mattered. Branches could process withdrawals, close accounts, settle transactions—but they could not accept a single birr from the public. There was no appeal mechanism. No temporary waivers. No transitional period. Only the next application window, six months away.

The Liquidity Crisis

The first week brought confusion. The second brought movement. Households with modest balances closed their accounts. Banks quietly encouraged it, directing people to “seek alternative arrangements.” Small businesses followed. Associations and cooperatives withdrew what they had and left.

But not all money disappeared. A narrow segment remained untouched—the wealthy 0.5 percent whose accounts satisfied every requirement of the new framework. Their deposits still flowed. Their privileges remained intact. Banks competed for them with preferential rates, dedicated desks, and velvet-service queues. The system now had its “qualified depositors.”

With millions of small, steady accounts gone, the rhythm of banking broke. Liquidity stopped behaving like a river fed by countless springs and began behaving like a reservoir controlled by the moods and movements of a few.

Banks adjusted quickly. Branches in rural areas and low-income neighborhoods shut down. These branches had never relied on the ultra-wealthy; without ordinary savers, they were empty rooms. Lending was narrowed to the top-tier clients whose balances could stabilize a balance sheet. Interbank lending grew erratic—large transfers cleared instantly; smaller ones stalled for lack of buffers.

Inside headquarters, departments reorganized overnight. Staff serving the mass market—tellers, loan officers, branch assistants—were laid off. Geographic coverage collapsed inward toward affluent districts and commercial centers. The system shrank to match the scale of its remaining depositors.

On paper, banks were solvent.  In practice, they had become custodians for a sliver of the public. Everyone else had quietly exited the system.

With six months until the next licensing round, branches adapted, executives recalculated, and the crisis reshaped the sector in silence—without explosions, without drama, just a slow contraction of what the formal system was able to be.

The Bankers’ Ekub

The elite 0.5 percent of depositors—their accounts intact, their privileges untouched—felt no crisis. But their narrow stream of funds could not sustain a system built to run on millions of small, steady contributions.

With public deposits sealed off, banks turned to each other. What began as discreet conversations between CEOs—quiet meetings in hotel lounges, guarded phone calls—solidified into an invitation-only consortium. They called it, without irony, the Liquidity Ekub.

Each participating bank—five at first, then seven—contributed a fixed monthly sum into a rotating pool. A billion birr apiece. The payout moved from bank to bank according to a private schedule. Whoever drew that month used the funds to plug liquidity gaps, refinance a stressed corporate client, or stabilize a balance sheet shaken by a single large withdrawal.

The mechanics were simple. They worked because the participants knew one another intimately: shared boards, overlapping auditors, years of reciprocal favors. Enforcement required no courts, no collateral registries, no regulatory process. A defaulter would face the one punishment banks truly feared—exclusion from the circle.

Reputation did the work. Relationships enforced the rules. Consequences were immediate. In a matter of weeks, the Liquidity Ekub solved the banks’ most painful problem—the lack of a reliable, low-cost enforcement mechanism.

And in solving it, the banks rebuilt exactly what they had long dismissed in the public: a trust-based, low-overhead, high-compliance financial system. What they once labeled “informal” had become their lifeline. They had recreated the architecture households use every day—just scaled up, sealed off, and reserved for themselves.

The Blame Game

By the second quarter, the crisis could no longer be contained inside boardrooms. Loan growth stalled. Branch networks shrank. The Liquidity Ekub kept a handful of large banks afloat, but it was no substitute for the millions who had once formed the system’s foundation.

The Ministry of Finance moved first. It declared a “deposit-mobilization emergency,” warning that the public’s retreat from banks threatened national development. Officials urged citizens to “fulfill their civic duty” and bring their savings back.

The message confused nearly everyone. The same state that had demanded impossible proofs from the banks now asked the public to trust them anyway.

The banks launched a parallel campaign. Billboards appeared across Addis Ababa— “Banks Need Your Trust Too.” Executives went on television to insist that the new licensing rules had been “misunderstood.” They appealed for empathy, asking the public to consider “the risks banks face.”

Inside the sector, frustration turned to open anger. At an emergency meeting, CEOs accused the regulator of setting mathematically impossible criteria. The geographic-benefit rule was unworkable for any national institution. The 200-testimonial requirement was unheard of anywhere in global banking. They warned, bluntly, that the sector could not survive another round.

The National Bank responded with a firm public report, placing responsibility back on the banks. They were, it said, “over-dependent on a narrow elite,” “insufficiently innovative,” and “culturally detached” from the majority. Trust, the report argued, had to be earned, not demanded.

None of it changed public behavior. Most households had already shifted their savings into ekubs, edirs, cooperatives, cash boxes—systems that required no forms, no pledges, no signatures. Systems that never failed. Systems that did not ask people to prove their worth.

The formal banking sector—once central, confident, and unquestioned—found itself pushed to the margins. Not simply losing deposits. Losing relevance.

Consequences

The consequences did not begin with collapse. They began with narrowing. A financial system dependent on a tiny elite could function, but only in a reduced form—alive, but brittle.

With the savings of the majority inaccessible, banks operated on a concentrated pool of wealthy depositors. The total money supply remained large, yet the flow became erratic. Liquidity no longer arrived in steady increments; it came in uneven surges determined by a handful of clients. A single transfer could upend a month’s planning.

Expansion stopped. New products were postponed. Technology upgrades shelved. Branch openings suspended. Treasury departments monitored balances with unfamiliar urgency. Volatility became a daily constraint, not an occasional risk.

As liquidity grew irregular, the real economy tightened. Firms that had treated credit as a predictable tool now found it uncertain. Working-capital lines were paused “pending review.” Letters of credit moved from delayed to unpredictable. Supply chains thinned, then frayed. Businesses trimmed production, shortened cycles, and ran lean inventories.

Nothing collapsed outright, but the economy shifted from initiative to caution. Companies that once planned for growth now planned for continuity.

Households felt the tightening next. Overtime disappeared. Hiring froze. Rotating schedules replaced full weeks. Families that had maintained modest stability watched their margins evaporate. Rent negotiations stretched. School fees slid. A routine illness became a financial threat.

As options narrowed, movement began quietly. A son left for Djibouti. A cousin for Nairobi. A neighbor for Metema. Migration became less about opportunity and more about escape—an attempt to outrun instability rather than pursue prosperity.

Institutional strain followed. Municipal revenues softened. Public services became irregular—garbage collection skipped a week, then two; water outages lengthened. Not from neglect, but from fewer hands, tighter budgets, and rising uncertainty.

Public frustration rose steadily. The image of banks as engines of development no longer matched lived experience. Government interventions—emergency directives, rapid policy adjustments—added pressure without restoring confidence.

The shift was cumulative rather than explosive: firms unable to plan, workers without security, households beyond their limits, institutions stretched thin. In a fragile state, this kind of pressure does not need a spark. It only needs time.

The Reveal

This story reverses the direction of the system. It feels like fiction only because we have swapped the protagonists. In reality, none of it is imaginary. Most Ethiopian households already live inside this architecture.

They already face forms they cannot navigate.

They already face rejections they cannot contest.

They already endure the tightening that follows exclusion.

They already absorb shocks—through unstable work, migration, shrinking choices.

Banks do not complete 200-page applications to earn deposits. People do. They are asked to meet criteria designed without them in mind—collateral they do not own, references they cannot gather, evidence no institution recognizes. And when they cannot, the system calls it “risk management,” masking exclusion as neutrality.

But exclusion today is no longer just exclusion. It has become a revenue source.

Consider digital platforms. They now move trillions of birr in payments. Officials cite these numbers as proof of “inclusion.” But inclusion for whom?

For platform providers—yes: fee income.

For banks—yes: float, data, and steady revenue.

For the system—yes: a window into the daily financial lives of people it still refuses to lend to.

And for the citizen?

They are included only as payers, never as partners. Their transactions generate profit. Their data enriches institutions. Yet when they seek the core benefit of inclusion—credit, investment, upward mobility—the same gates that opened for their data close for their needs.

The architecture of exclusion is bad enough. Turning that exclusion into a profitable enterprise and calling it “inclusion” is its quiet, final logic.

So the question is no longer whether people have earned the system’s trust. It is whether the system has earned theirs—and at what cost.

That is where the conversation must begin.

Tsegaye Nega (PhD) is a Professor Emeritus at Carleton College in the United States and the Founder and CEO of Anega Energies Manufacturing.

Contributed by Tsegaye Nega (PhD)