The analysis of demography and work-related characteristics reveals that social norms (SNs) in Ethiopia are strongly intertwined with cultural and religious traditions. Our findings indicate that a significant proportion of respondents adhere to SNs deeply rooted in orthodox Christianity, which has long shaped Ethiopian society. This cultural legacy appears to influence occupational choices as well: confirmatory individuals tend to favor traditional income channels such as government employment, whereas non-confirmatory respondents are more inclined to pursue entrepreneurial ventures in the private nonprofit sector. This pattern suggests that adherence to established norms may reinforce conventional career paths and discourage deviation from accepted modes of economic behavior.
Moreover, work-related beliefs are significantly influenced by SNs. Our quantitative analysis shows a statistically significant relationship between normative adherence and gender-related work beliefs; for instance, confirmatory individuals are more likely to consider it problematic for a woman to earn more than her husband (p = 0.034). This finding underscores the strong influence of traditional norms on employment decisions and recruitment practices. When individuals internalize these norms, they may favor male-dominated work environments, potentially affecting household income distribution and, ultimately, the performance of economic institutions. Such entrenched beliefs, if unchallenged, can perpetuate gender inequities and hinder broader economic progress.
Turning to economic well-being and saving behaviors, our results suggest that while both confirmatory and non-confirmatory groups report similar levels of economic satisfaction, the underlying reasons differ considerably. In qualitative interviews, confirmatory respondents often attributed their satisfaction to divine providence expressing contentment with their status by invoking religious gratitude which may lead to contentment without having basic things for life and a reduced drive to improve their economic circumstances. Satisfaction with once economy without having what is important for life and enough money, will not only harm the economic efficiency of a household but also an institution and a nation in general. This can imply that the person will not work hard or struggle enough to change his condition, because he/she is already satisfied with what he/she has and thinks it is enough. This finding is consistent with Alpman (2013), who also based on WVS data and revealed that SNs play a significant role in shaping individuals’ behavior and decisions, impacting their economic efficiency and development. In contrast, non-confirmatory respondents provided more detailed accounts of their assets, such as owning a car or a house, and expressed a pragmatic preference for investment over mere saving. This divergence is further illustrated by differences in attitudes toward wealth accumulation. The study also shows that the belief that ‘money is evil’ is inculcated in most of the confirmatory groups and negatively affecting their saving culture and economic performance. They tended to view the accumulation of money negatively associating it with greed and social decay whereas non-confirmatory groups saw investment as a means to generate additional income and create employment. Although self-assessments of economic status are subject to bias, these nuanced differences in financial outlook highlight the complex interplay between SNs and economic behaviors.
Institutional trust is another critical area where SNs exert influence. Our data reveal that confirmatory groups, who rely heavily on traditional norms, exhibit slightly lower trust in modern economic institutions such as government bodies and the Banks. From among the listed more than ten organizational memberships, religious institutions are the only category where confirmatory groups outnumbered non-confirmatory groups. This suggests that social norms in Ethiopia strongly reinforce religious affiliation, shaping patterns of institutional trust and engagement. This trend may be attributed to the interplay between Ethiopian SNs and religious values, which emphasize trust in divine providence over financial institutions and foster skepticism toward unfamiliar things, including modern economic structures. Given that 97% of respondents consider God important in their lives and 78.53% adhere to confirmatory norms, financial institutions in Ethiopia face a challenge in gaining widespread trust and participation. The low trust may also stem from a preference for traditional, community-based institutions like Equb and Edir, which are perceived as more reliable and culturally resonant. These findings are in line with previous studies (Baidoo and Akoto, 2019; Murphy, 2006; Williamson, 1993) that emphasize the importance of trust in the effective functioning of economic institutions.
In summary, our findings indicate that while SNs significantly shape economic behaviors and institutional trust in Ethiopia, these effects are embedded within a broader socio-cultural and economic context. The divergence between confirmatory and non-confirmatory groups is evident in work-related beliefs, saving practices, and perceptions of wealth, with traditional norms often impeding economic dynamism. Modern economic institutions must therefore consider strategies that not only improve service delivery but also integrate lessons from indigenous institutions emphasizing trust building, flexibility, and inclusiveness—to better serve the diverse needs of the Ethiopian community. Recent studies also warn of the decline of traditional norms amidst modernization and urbanization (Yazew and Kassa, 2024), underscoring the urgent need for policies that preserve the beneficial aspects of these norms while fostering innovative, adaptive economic governance.
Lessons for modern economic institutions form SN based traditional informal institutions such as Equb and Edir
Various research works indicate that the indigenous economic institutions in Ethiopia are more reliable for the local community and successful not only in terms of having a large number of members, but also in effectively improving the economic well-being of their member and the community in general. To give lessons for modern EIs in Ethiopia, for this study, we only focused on Edir and Equb. These institutions are highly prevalent; more than 90% of Ethiopians joined some form of traditional savings (Equb) or informal insurance (Edir) institutions. The International Food Policy Research Institute (IFPRI) Ethiopian Rural Household Surveys (ERHS), 1989–2009, indicate that 85% of households in rural areas are members of an Edir, and in the central parts of Ethiopia, the number goes up to 93% (Habtu, 2012). Data from the World Bank also shows that 62% of Ethiopians reported saving money in the past year, but only 26% saved formally at the formal financial institutions (Bessir, 2018), and the rest 40% saved in informal institutions. This indicates the SN-based informal and indigenous institutions in Ethiopia are effective, efficient, active, trusted, and well-organized. Thus, there are huge lessons that the modern economic institutions in Ethiopia can learn from them. We identified at least three interrelated important lessons: trust building and reliability, flexibility and working with the vulnerable, and inclusiveness and ingenuity. As shown in Fig. 7, all lessons depend and reenforce each other and requires tangible actions from the modern EIs.
This figure outlines the core lessons modern Ethiopian economic institutions could adopt from traditional structures like Edir and Equb, focusing on trust-building, inclusiveness, and flexibility in serving diverse community needs.
Trust building and reliability
When thinking of trust what comes to most people’s mind is trust in EIs, nevertheless, our data shows there is no issue with that. Rather it is the reverse, EIs’ trust on the community. To build trust and become reliable, and also demonstrate their trust on the community, banks and insurance companies in Ethiopia have to make their services holistic. They should not have to focus only on collecting money and making a profit. Successful informal institutions such as Edir and Equb are playing a multipurpose role in the community. Although their main objectives are risk sharing and saving, respectively, they also play other important roles. Studies show that indigenous institutions in Ethiopia like Equb, Edir, and Mahber are serving as risk coping mechanisms, giving credit services, providing labor power services, and playing a role in natural resource management, information distribution, and conflict resolution (Habtu, 2012).
The word cloud on Fig. 8 from KII data is generated from the question, what modern EIs in Ethiopia have to do to increase community trust? We can see that ‘Community work’, ‘Awareness’ and ‘Survive’ is the most visible word. They can involve in the natural resource management, health education campaigns, pure water provisions, and other activities that can benefit the community while teaching the significance of saving. They can also expand their credit services to the wider community to serve the people and to gain trust by providing money when the people need it. Moreover, they can also play a significant role in information distribution. This should not have to be just opening a Facebook page and posting, teaching, or advertising on television and radio; they must go down and physically move to the village and from house to house to teach and serve. This also helps them learn the culture and become familiar with the local community. The interview participants also indicated that ‘if people know you, they trust you, and if they trust you, they will give you, their money’.
This word cloud visualizes community members’ suggestions for actions modern economic institutions can take to enhance public trust. Prominent themes include ‘community work,’ ‘awareness,’ and ‘support,’ reflecting a desire for institutions to engage more directly with local needs beyond traditional banking services.
Indigenous institutions are also playing a very important role in economic development through collective actions. Almost half of the Edir provide loans for their members. Mahber, which is mainly a religious association, also serves as a risk-coping mechanism, provision of information, addressing manpower, and traction force (Habtu, 2012). The modern institutions in Ethiopia are providing loans only to a limited number of customers, mostly the rich, who have trade licenses and can provide collateral and diaspora who have dollar. Nevertheless, the informal institutions managed to amass mass membership using their loan mechanisms. For instance, in Equb, every member has an equal opportunity to take the money using the lottery method, but if one member informs the chair first that he or she needs the money, they will give it to him or her. The maximum requirement is to have someone from the Equb as a guarantee, which serves as collateral. This helps the member get their money when they need it.
SNs based traditional informal EIs such as Equb and Edir genuinely trust their members or customers. They established based on trust and if one of their members needs money they give loan without any collateral request. ‘Modern EIs, especially banks, have to seriously consider the issue of loans,’ said one of our informants. Anyone who saves money at a particular bank should have the right to borrow when he or she needs it. Because, as most of the informants indicated, borrowing money is the last and best option to get money when they need it. Regarding this, one informant raised an important question: ‘If they [banks] don’t trust and give me money when I need it, why do I trust them and give them my money?’ To improve this, banks have to reform their requirements to give loans. Of course, banks need a guarantee that the money they give will come back. For this, they can study and use the example of traditional informal institutions such as Edir and Equb in Ethiopia.
In addition to serving as insurance (risk coping), provision of credit, and sharing of information, Edir is also playing a role in health education, for instance HIV prevention (Pankhurst and Mariam, 2000) assisting victims during bereavement, serving as a risk-sharing mechanism, and providing health insurance (Mariam, 2003). Studies show that, of the people who joined Edir, more than 21% are already using it as health insurance, and 90% of them indicated that they are willing to use it to cover their health expenses. In addition, Edir also covers burial ceremonies, wedding expenses, house fires, and health care for its members. Generally, the indigenous institutions in Ethiopia have a remarkable role in social support, conflict resolution, and promoting social cohesion (Aredo, 2010; Genet, 2021). This shows that traditional financial institutions are not only for money but also for social services, care, and risk sharing. In most of the Ethiopian community norms, doing something only for money is considered bad. Anyone who only focuses on money is considered greedy and inhuman. This might be another reason why people are suspicious of banks because they only focus on money and making profit. For this reason, modern economic institutions can expand their services or engage in humanitarian activities too.
Flexibility and working with vulnerable groups
Research shows that informal economic institutions in Ethiopia are flexible, adaptive, and negotiable (Habtu, 2012). These institutions are established based on well-defined rules and regulations (Hoddinott, Yisehac (2015)). But they are flexible in their service—in providing money for their customers. One of the biggest complaints that the interview participants raised was the rigid system of modern economic institutions in Ethiopia. When it comes to giving money, these institutions have ‘rules and regulations’, which are not compatible with the local community culture or norms and are mostly based on the Western institutional culture. Western institutions are mostly based on mistrust, or at least ‘calculative trust’ (Williamson, 1993). Nevertheless, successful informal institutions can teach a good lesson in terms of this. They are not only flexible in terms of their services but also adaptive and negotiable. Adapt to different places’ cultures and situations. For instance, the way they give money as a form of loan is different from place to place in different parts of Ethiopia. They adapt to the area’s main economic activities, climate, the main product of the area, religion, and even literacy level. Modern economic institutions can study and learn from this to make their services flexible and adaptable depending on the situation in which they are operating.
Habtu (2012) indicated that these informal institutions help mostly the most vulnerable groups of society. They not only focus on the rich or those who have money, like modern institutions, but also on the vulnerable. This not only helps them reach a large number of people, the mass or majority, but also makes them preferable to development actors because they are more accessible than government-affiliated formal institutions (Walo, 2016). This includes a willingness to work with the low-income community and allow them to save money with their capacity. For instance, in Equb, anyone can participate in saving starting from 100 to 10,000 ETB and even as low as 50 ETB or 10 ETB. As a reminder, one informant noted that ‘banks and insurance companies should know that the majority of Ethiopian society is poor.’ Modern economic institutions only focus on the rich. They give special services to the rich.
Working with a vulnerable group of the community also requires an effort to address food insecurity. Informal institutions, such as Edir, Equb, and Debo, are actively participating in food security. Membership in these institutions significantly contributes to food security (Negera et al., 2019). Modern economic institutions such as banks and insurance can play a role in food security by working with poor community members. Especially during the harvest season, they can work with farmers by providing loan to organize their harvest and plan their future savings.
Inclusiveness, ingenuity, and creativity
Data shows that traditional informal institutions in Ethiopia are inclusive, democratic, ingenious, and creative. Wedajo et al. (2019) indicated that these informal institutions are inclusive. Edir is considered to be ‘Ethiopia’s most democratic and egalitarian social organization.’ (Pankhurst and Mariam, 2000). The qualities of inclusiveness and egalitarianism make them owned by the community. This is one of the important qualities that the modern economic institutions in Ethiopia lack. They are established based on the models of Western structure, with no need for or base in the community.
Nevertheless, modern economic institutions can be inclusive, ingenuous, and creative by establishing a community advisory group (CAG). They can include senior community members, elders, heads of community-based organizations (CBO), religious leaders, traditional village leaders, and also former collectors of Equb and Edir to learn from and adapt to traditional economic institutions. This not only helps them to be inclusive and egalitarian, but also to know what the community thinks of them and how to adopt some techniques and strategies to encourage saving and get more trust and customers from the community. They can have regular meetings with these advisory groups to share their progress and get recommendations from them. The advisory group can show them ways to share benefits with the community in a way that benefits the institutions. By narrowing the differences between modern economic institutions and indigenous community-based organizations, the advisors can serve as a bridge between the two.
Most studies also admired the ‘ingenuity and creativity’ of the informal institutions and indicated the cooperatives’ and ‘huge potential for saving mobilization’ (Aredo, 1993; Teshome, 2008). In addition, if banks establish and effectively run community advisory groups, they can help them adopt the ‘ingenuity and creativity’ of the informal indigenous institutions. Banks in Ethiopia are working hard to mobilize savings; nevertheless, none of them have worked with informal saving institutions so far, which is regarded as a ‘huge potential for saving mobilization’. Rather than investing billions in advertising, it is wise to work with informal institutions by establishing advisory groups. Studies show that they have more power to influence community members’ behavior, decisions, attitudes, and practices (Regassa et al., 2013).
These three lessons for modern economic institutions in Ethiopia are interrelated (see Fig. 3). Trust building and reliability depend on flexibility and working with the vulnerable, which also needs inclusiveness and ingenuity. As indicated above, to be acceptable and trusted among the community, they need to be flexible and ready to work with anyone, including the vulnerable and poor groups of the community. To be flexible and ready to work with others, they have to be inclusive and resourceful. They have to establish a community advisory group, start working on their weaknesses, and learn from the indigenous institutions. Nevertheless, recent studies are showing that these indigenous traditional institutions are declining because of ‘modernization’ and urbanization. Yazew and Kassa (2024) revealed the decline of traditional norms amidst urban expansion which presents challenges for modern economic institutions, underscoring the importance of integrating social norms into economic planning. Thus, we need policies that recognize and preserve traditional social norms which are essential for fostering trust in economic institutions and facilitating effective economic governance.
