Abstract This study investigates the role of foreign exchange offices in facilitating business access to the foreign exchange market in Ethiopia, a country characterized by persistent foreign currency shortages and a tightly regulated exchange system. While foreign exchange constraints are widely acknowledged as a major obstacle to private sector development, existing research has largely focused on macroeconomic policy, exchange rate management, and the role of commercial banks. Consequently, limited empirical attention has been given to foreign exchange offices as non bank intermediaries and to their actual operational contribution to business access. This study addresses this gap by providing an institution level and stakeholder based assessment of foreign exchange offices within Ethiopia’s foreign exchange framework. The study employed a qualitative research design using an exploratory and descriptive approach. Primary data were collected through semi structured interviews with three key stakeholder groups: licensed foreign exchange office operators in Addis Ababa, business owners who regularly use foreign exchange office services, and officials from the National Bank of Ethiopia responsible for foreign exchange regulation and supervision. In addition, relevant policy documents, foreign exchange management directives, and recent national and international reports were reviewed to contextualize interview findings. Data were analyzed using thematic analysis, which enabled the identification of recurring patterns related to institutional roles, service scope, regulatory constraints, and stakeholder perceptions. The findings reveal that foreign exchange offices in Ethiopia operate within a narrow and clearly defined mandate. Their activities are limited to buying and selling foreign currency notes and primarily serve travelers, individuals, and walk in customers who require immediate access to physical foreign currency. The study finds that foreign exchange offices do not provide business related foreign exchange services such as opening foreign currency accounts, issuing letters of credit, financing imports or exports, processing remittances, engaging in interbank foreign exchange trading, or conducting non cash foreign exchange transactions. These functions remain the exclusive responsibility of licensed commercial banks and authorized financial institutions. As a result, the contribution of foreign exchange offices to business access is indirect and confined to small scale, cash based transactions. Despite these limitations, the study shows that foreign exchange offices play a modest but meaningful supporting role. They help businesses meet minor and urgent foreign currency needs and provide a legal and transparent alternative to informal foreign exchange markets for small transactions. However, their effectiveness is constrained by regulatory transaction ceilings and persistent shortages of foreign currency notes, which limit their capacity to consistently meet demand. Regulatory perspectives indicate that these constraints are intentional and reflect policy priorities related to market order, financial stability, and risk management rather than institutional inefficiency. This study concludes that foreign exchange offices function as supplementary cash exchange points rather than solutions to systemic business foreign exchange constraints, and that clear recognition of their limited mandate is essential. The findings are useful for policymakers, regulators, and practitioners because they inform realistic expectations, support evidence-based policy design, and guide institutional coordination within Ethiopia’s foreign exchange reform agenda in academic research and practical decision making.
Sahlemichael Mekonnen Demisse (Mon,) studied this question.