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- ⌛ Ethiopia's AI Moment Is Coming
Welcome to the 54th edition of ፍራንክ Digest!
Your weekly brief on all things Finance and Investing. Quick, enjoyable reads for busy professionals in 5 minutes or less.
Here’s what’s coming your way:
👨💻 Hello AI, Good-bye Humans? AI Could (Gently) Disrupt Ethiopian Banking
🥕 How to Herd a Donkey: Ethiopia’s Carrot & Stick Economic Policy
🗝️ The Key Takeaways
Thanks for reading!
AI in Ethiopian Finance: Threat or Sign for Hope?
Artificial Intelligence
The way that intelligence of the artificial kind is heading, it’s only a matter of time before large language models powered tools like ChatGPT begin deciphering ሰምና ወርቅ.
AI has made unprecedented strides over the last few years: from solving complex math problems to creating hyper realistic videos (who could forget that video of Will Smith eating spaghetti).
Creepy celebrity AI video aside, it’s clear that every business opportunity in the future is tied to AI in some shape or form.
🏷️ Your local ሸምሱ might use it to filter out money losing inventory…or customers
🚗 The car wash down the street can use a personalized loyalty program to retain customers
🧬 Or radiologists being able to identify diseases much faster through computer vision
And whilst we can only dream of Ethiopian businesses going online to find the best AI Software-as-a-Service (SaaS) tool, things might not be that far away.
You see, in the financial sector, AI is no longer a luxury, rather a need, like a refreshing drink of water on a hot day. It has the potential to raise productivity levels for the everyday task but also launch products or services at previously unprecedent timelines.
That world is so complex that companies are always looking to find ways to leverage the latest technologies.
This is true even in Ethiopia.
In a recent report, 28 out of 31 local banks admitted that they were defrauded of millions from money laundering to counterfeit currency and even fake checks.
CBE’s ‘Free money’ fiasco was further evidence that risk and compliance mitigation frameworks were not adequate, an aspect AI is now pretty much entrusted in dealing with.
Institutions have seen enough and most are taking the necessary steps to bolster their defense mechanism through AI like AML (Anti-Money Laundering) tools and Identity Verification Software.
But the use cases are much broader. For example, as customer numbers grow, so will interactions.
AI chat bots, or AI agents as they are called nowadays, can provide a level of customer support on a 24/7 basis. Even resolving account related issues without the intervention of a human. See a recent interview of Visa’s CEO introducing their AI agent being able to autonomously shop for you.
Another aspect where AI can play a role in financial services is the identification of a worthy borrower, a.k.a creditworthiness! AI can use data points from age to income and even spending habits to assign a creditworthiness score.
This particular AI, in this shape, has not landed 🛬 in Ethiopia yet but FinTech companies like Kifiya Technology are leveraging their own version and partnering with banks alike to offer an alternative solution.
‘Well thanks for the info buddy, but I thought we were exploring the effects that AI was going to have on people’s livelihood in Ethiopian finance…what gives?’
Short answer: it’s currently not significant, and likely not in the short to medium term either.
Despite a necessity for efficiency and cost cutting opportunities, it’s highly unlikely that the working culture will push away employed individuals out of the job market to accommodate AI driven initiatives.
It’s just not the Ethiopian way 🤷♂️
From our vantage point, AI will probably see its stock rise in loan disbursement activities, namely evaluating one’s creditworthiness: determining how much to loan an individual or business with less reluctance on collateral, more on data points 📊
Why Does This Matter To You?
Contrary to what Homer is saying, AI is real! And while it might be fun to play around with, it has some real world application.
Ethiopia is well behind all the fun but doesn’t mean it can’t catch up.
As a look around the world will tell us, AI adoption is usually prominent in the finance sector first: institutions here are still behind when it comes to leveraging its full potential, yet changes are coming with AI potentially making your life a little bit easier.
Prime example, being approved for more loans without handing over any collateral!
Key Takeaways
AI knockin’: Since the advent of large language models (LLMs) such as ChatGPT, AI has been a hot topic. Not just in discussion, but in practice too, with many industries benefiting
Ethiopia: We hope to see its use cases in different levels but AI will make a mark on the Financial sector, be it AML, ID verification or credit scoring
Potential Threat?: Our financial system is not complex enough to view AI as a threat to the workforce. Plus, the economy is looking to add more skilled workers, not dump them.
ፍራንክ Picks
🗞️ In the news: Singapore dips its toe in Ethiopian startups with $150k funding
The Carrot & The Stick
Economy
In Ethiopia, economic policy often resembles the challenge of coaxing a stubborn donkey forward. One day you're offered a handful of carrots to tempt you, the next you're slapped with a surprise fine for grazing in the wrong field.
The government is working hard to industrialize and stabilize the economy—but it's not a smooth ride. Incentives look good on paper, but they're often tangled in red tape. Meanwhile, restrictions meant to curb forex leakage or inflation end up stifling the very businesses Ethiopia needs to grow.
So what’s the deal?
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