A significant share of remittances sent by Ethiopians abroad continues to flow through informal channels — physical cash carried by travelers or moved through unregulated networks — rather than through formal banks or licensed money-transfer operators.
This reliance on informal mechanisms carries real costs and risks. Senders and recipients who rely on these networks face exposure to loss and theft with no legal recourse. Beyond individual risk, the use of informal channels prevents the Ethiopian government and central bank from obtaining a complete picture of total currency inflows, complicating monetary and foreign-exchange policy planning.
Part of why informal channels persist despite their risks is the cost of formal alternatives. Ethiopians in the diaspora pay an average of about $10.50 to send $200 through formal remittance pathways, though the cost varies by sending country: approximately 9.43% from the United Kingdom, 8% from Italy, 5.75% from the United States, and 5.1% from Saudi Arabia. For many senders, these fees represent a meaningful barrier to using formal channels.
Recent policy changes have begun to address these structural barriers. In 2026, the National Bank of Ethiopia implemented foreign exchange liberalization measures designed to make formal channels more attractive, including loosening surrender requirements for exporters and granting banks greater freedom to set market-reflective rates.
Digital innovation has accelerated the shift. The Commercial Bank of Ethiopia launched CBE Connect, a multicurrency digital wallet, in 2026, allowing diaspora members to hold foreign currency, transfer digitally, and convert to birr at market-based rates — a direct effort to provide a modern alternative to both traditional bank transfers and informal networks.
These developments mark a turning point in how Ethiopian authorities and financial institutions approach diaspora remittances: combining regulatory reform, improved transparency, and digital accessibility in an effort to shift more flows into the formal system, which would benefit individual users through improved security and give the central bank better macroeconomic data.
