REGULATING INFORMAL FINANCIAL INSTITUTIONS IN ETHIOPIA: THE CASE OF ‘IKUB’ IN GURAGE SOCIETY

Abstract

This thesis examines the legal and practical challenges of one of the most important Ethiopian informal financial institutions known as ROSCA or Ikub. These institutions play a vital role in solving financial problems among Gurage societies. While playing a key role in addressing financial issues in Gurage, many Ikubs lack auditors and do not conduct regular audits, leading to potential problems with financial transparency and accountability. In addition, there are Ikubs in Gurage that impose penalties each day due to noncompliance, even though the Ikub operates on a weekly basis. These institutions in Gurage often lack written internal bylaws, despite some having their own bylaws, which often conflict with the national laws. Moreover, this thesis found that, in most Ikub of Gurage the chairperson took full lot of Ikub without making any contributions to the entire season, which can result in the chairperson gaining unfair advantages. However, lessons from Thailand and South Africa show that a ROSCA manager does not gain any advantages besides being eligible to receive the central fund within a specified timeframe. Overall, this thesis sheds light on the complexities of informal financial institutions operating in Gurage, Ethiopia, and provides insights into the need to have a separate legal framework to govern informal financial institutions like Ikub in Ethiopia.