Human Rights Due Diligence in the Ethiopian Finance Sector: An Analysis of Laws, Credit Policies and Procedures

Abstract

The pursuit of sustainable business practices that prioritize human rights has emerged as a critical global concern. Financial institutions can significantly impact human rights through their direct operations and the relationships within their value chain. Despite the relevance of this topic, the human rights due diligence of financial service business frameworks in Ethiopia remains largely unexamined. This study assesses the laws, credit policies, and procedures of Ethiopian financial institutions with respect to international principles and self-regulatory standards. Employing a doctrinal research method, the analysis draws upon a variety of sources, including international frameworks, national policies, literature, and institutional credit manuals.
The findings indicate that the laws as well as credit policies and procedures of Ethiopian financial service providers partially comply with global human rights due diligence standards but are inadequate in addressing the complexities of human rights impacts. It highlights systemic issues such as weak regulatory frameworks, poor stakeholder engagement, and inadequate capacity-building efforts that impede the realization of human rights. A notable gap exists in private financial institutions, which place less emphasis on human rights due diligence compared to their state-owned counterparts. Factors contributing to this disparity include structural differences, regulatory environments, and resource constraints that uniquely affect private institutions.
To ensure the banking sector in Ethiopia aligns with sustainable development goals and enhances financial inclusion strategies, this study highlights the need for comprehensively improved human rights due diligence standards across the industry. Specific policy recommendations for stakeholders in the Ethiopian financial sector include the implementation of comprehensive human rights training for staff, the establishment of transparent monitoring mechanisms, and greater engagement with affected communities. These actions will help to foster a financial ecosystem that prioritizes human rights and encourages sustainable economic growth.