The role of social norms in shaping trust and economic behavior in the Ethiopian financial institutions

This study examines how social norms (SNs) influence trust in financial institutions and shape economic behavior in Ethiopia, where informal institutions such as Equb and Edir coexist with modern banking and insurance systems. This research addresses two key questions: (1) How do social norms affect economic behaviors, such as saving, investment, and institutional trust? (2) What lessons can formal financial institutions learn from the traditional economic structures? Using a mixed-methods approach, this study draws on World Values Survey (WVS) Wave 7 data (n = 1230) and 98 key informant interviews from seven Ethiopian cities. Quantitative data were analyzed using descriptive statistics, chi-square tests, and thematic coding of qualitative interviews. Findings indicate that 78.5% of respondents are “confirmatory,” meaning they adhere closely to prevailing social norms, while 21.5% are “non-confirmatory,” demonstrating a greater willingness to deviate from societal expectations. While economic satisfaction did not significantly differ between groups (p = 0.812), confirmatory individuals exhibited lower trust in the government (64.5%) and major banks (69.2%) than non-confirmatory individuals (72.6% and 76.5%, respectively; p = 0.015, p = 0.04). Additionally, qualitative insights reveal that confirmatory individuals hold stronger reservations toward wealth accumulation and savings, which may have implications for financial decision making. To improve financial inclusion and institutional trust, policymakers should integrate trust-building mechanisms from informal institutions, increase financial literacy, and develop more flexible banking services. Recognizing the effectiveness of Equb and Edir, formal financial institutions should adopt community-driven approaches to enhance their accessibility, reliability, and participation.