Ethiopia’s family businesses, long recognized as the backbone of the country’s private sector for their sustainability and longevity, are grappling with critical gaps in finance and innovation that hinder their growth potential, according to the 2025 Annual Family Business Survey.
Launched at the third Ethiopian Family Business Forum (EFBF) 2025 under the theme “Embracing Change for Growth and Innovation,” the report, conducted by HST Consulting, draws on input from 32 family firms across manufacturing, retail, trade, logistics, agriculture, and services sectors. It reveals that while these businesses remain stable and resilient, many struggle to accelerate expansion due to limited access to capital.
Access to funding emerged as the largest barrier, with 21 percent of respondents naming lack of finances as the primary constraint on growth. Solomon Gizaw, CEO and Chairman of HST, highlighted that family businesses’ natural resilience contrasts with their financial limitations. “They are growing but capital access has not kept pace with their ambitions,” he said.
Most companies continue to rely on internal funds, slowing their ability to enter new markets and adopt technology. Bank loans remain the preferred financing option, followed by retained earnings and equity. Less conventional approaches like public offerings and crowdfunding are rarely pursued, reflecting limited awareness and perceived risks.
The economic backdrop compounds these challenges. Ethiopia’s inflation is projected at around 25% by 2025, and government efforts to reduce spending and improve domestic revenue through credit rationing may further restrict family businesses’ access to external capital.
Beyond financing, the survey uncovers a disconnect between family firms’ stated commitment to innovation and its practical application. While 79 percent regard innovation as vital to long-term competitiveness, only 25 percent have formal innovation initiatives, and 31 percent maintain structured processes to support innovation. Digital technology adoption is growing but has yet to deliver transformative results.
Nearly half of the businesses surveyed (47 percent) have not yet clarified the role of the next generation in innovation, revealing challenges facing often first-generation companies in leadership succession and engagement. Encouragingly, 31 percent report active involvement of younger family members in new ideas and practices.
Solomon Gizaw emphasized the need to integrate younger leaders to ensure continued innovation and longevity. Speaking at the forum, Tilahun Esmael, CEO of ESX, stressed family businesses’ critical role in driving Ethiopia’s capital market growth.
Organized by HST Consulting, the forum underscored the importance of modernizing management practices, improving financing access, and supporting innovation to secure family businesses’ futures. The survey sends a clear message to business leaders and policymakers: transforming today’s established family enterprises into resilient market leaders requires targeted policy and practical support.
