The Transformative Role of Iddir and Iqub in Social Protection, Community Cohesion, and Development in Ethiopia: Woldia City in Focus

The Transformative Role of Iddir and Iqub in Social Protection, Community Cohesion, and Development in Ethiopia: Woldia City in Focus

Muluneh Demissie Sisay

Woldia University, Sociology Department, Woldia Ethiopia

DOI: https://dx.doi.org/10.47772/IJRISS.2025.909000013

Received: 22 August 2025; Accepted: 30 August 2025; Published: 26 September 2025

ABSTRACT

This paper explores the essential, changing functions of Ethiopia’s traditional institutions, Iddir and Iqub, in filling important voids in official social protection and financial systems. Iddir, initially established as funeral organizations, and Iqub, a variant of rotating savings and credit groups, have demonstrated adaptability as culturally rooted systems for fostering social capital, improving resilience, and encouraging local development. Utilizing a comprehensive desk-based analysis of academic articles, case studies, and theoretical frameworks—such as institutional economics, social capital theory, and development anthropology—the study consolidates current knowledge to illustrate how these institutions serve as essential complements to state and market systems. Iddir serves as an essential informal social insurance system, gathering resources to provide emergency assistance and funeral support, thus alleviating financial insecurity. Simultaneously, Iqub enables financial opportunities and business engagement, especially for women and low-income groups frequently marginalized by traditional banking. The research emphasizes that both organizations enhance bonding social capital (trust within groups) and bridging social capital (cooperation between groups), which are vital for collective action and community resilience. Their achievement depends on trust, mutual benefit, and low levels of bureaucracy. Nonetheless, the analysis also reveals shortcomings, including exclusivity, informality, and gender inequalities in leadership and advantages. In summary, this study contends that Iddir and Iqub are not simply remnants of history but active, vital participants in the developmental framework of Ethiopia. The research supports policy frameworks that officially acknowledge and purposefully incorporate these indigenous entities into national social protection and development strategies, fostering a more inclusive, effective, and culturally attuned method for sustainable development.

Keywords : Iddir  Iqub  Ethiopia   Indigenous Institutions   Social Protection    Local Development

BACKGROUND

Social protection and local development are vital to the international development agenda, especially within the context of the Sustainable Development Goals (SDGs), which highlight poverty alleviation, inclusive growth, and resilience enhancement (United Nations, 2015). Historically, state-driven formal social protection systems, like public pensions, health insurance, and welfare assistance—have been viewed as the core of social security in developed countries. Nonetheless, in many regions of the Global South, particularly Sub-Saharan Africa, the effectiveness of these formal systems is restricted due to poor state capacity, financial limitations, and institutional inefficiencies (Barrientos & Hulme, 2008; Devereux & Sabates-Wheeler, 2004).

In situations where formal welfare systems are lacking, informal and community-oriented organizations have traditionally addressed significant needs. Informal risk-sharing mechanisms and rotating savings and credit groups (ROSCAs) have been recorded throughout Asia, Africa, and Latin America as essential safety nets for at-risk households (Geertz, 1962; Besley, Coate, & Loury, 1993). These organizations serve not just as methods of financial transactions but also as representations of cultural values like trust, solidarity, and reciprocity (Platteau, 1991). They offer protection against disturbances, enhance credit access, and bolster social unity in ways that formal systems frequently cannot mimic (Ostrom, 1990).

Throughout Africa, local institutions have been crucial in addressing development issues. In Kenya, chamas (women’s savings groups) offer vital financial access for small merchants, whereas in South Africa, stokvels have transformed into influential financial cooperatives that greatly impact local economies (Ardener, 1995; Khavul, 2010). Likewise, in West Africa, tontines function as essential financial intermediaries, especially for women entrepreneurs (Bouman, 1995). These organizations succeed as they are rooted in local cultures, function based on trust, and need minimal formal bureaucracy. Nevertheless, their ability to enhance development impact on a larger scale is frequently limited by their informal characteristics, absence of regulation, and susceptibility.

Ethiopia, similar to numerous African nations, encounters ongoing development issues even with significant economic advancement in the last twenty years. The nation has enacted extensive poverty alleviation programs and social protection measures, including the Productive Safety Net Programme (PSNP), which is among the largest social protection initiatives in Sub-Saharan Africa (World Bank, 2019). Nonetheless, coverage disparities are substantial: extensive portions of the rural and urban impoverished are still beyond the reach of government programs, while unemployment and vulnerability persist in hindering development (Devereux & Getu, 2013). In this context, community-driven organizations grounded in Ethiopia’s cultural heritage—Iddir and Iqub—continue to be essential.

Iddir, originally formed as funeral groups in the early 20th century, now offer expanded social protection roles, such as financial aid for illnesses, accidents, and various emergencies (Pankhurst, 2009). Iqub, conversely, signifies a type of rotating savings and credit association (ROSCA), allowing households shut out of formal banking systems to gather resources, obtain lump-sum capital, and invest in small businesses or education (Aredo, 1993). Both institutions represent more than just coping strategies; they are cultural representations of solidarity, reciprocity, and shared responsibility that have endured through modernization. Ethiopia’s Iddir and Iqub are particularly remarkable due to their capacity to evolve and stay significant even amidst urbanization and globalization. They illustrate that indigenous institutions are not fixed remnants of history but dynamic systems that actively influence modern social and economic conditions (Poluha, 2004). Although formal development models typically highlight state institutions and market dynamics, Ethiopia demonstrates that community-based organizations play a crucial role in local development. Acknowledging their contributions—and addressing their shortcomings—is essential for creating inclusive and culturally informed development pathways.

Problem Statement

Despite Ethiopia’s rich history of indigenous institutions like Iddir and Iqub, their contributions to modern development have not been sufficiently recognized in research or policy discussions. In Ethiopia, development planning persistently emphasizes government-led social protection initiatives, contemporary financial institutions, and interventions by foreign NGOs (World Bank, 2019; MoLSA, 2014). Although these initiatives are significant, they frequently neglect that Iddir and Iqub are the most accessible, reliable, and culturally rooted systems for risk-sharing and local development, especially in rural and low-income urban areas (Pankhurst, 2009; Aredo, 1993). This results in a notable policy void: how can Ethiopia advance its development strategies by utilizing, rather than sidelining, these entrenched cultural institutions?

From a theoretical standpoint, development literature has historically been influenced by modernist paradigms that favor formal institutions rather than informal ones (North, 1990). Informal institutions are frequently depicted as temporary frameworks expected to disappear with modernization. Still, in Ethiopia, Iddir and Iqub persist and evolve amidst economic shifts, urban growth, and globalization (Dejene, 2011). This challenges linear models of institutional transformation and demands new theoretical frameworks that acknowledge the synergies between formal and informal systems. The absence of ongoing theoretical examination of Ethiopia’s indigenous institutions restricts our capacity to understand them as development agents on their own.

From an empirical perspective, the majority of existing research on Iddir and Iqub is descriptive, historical, or region-specific. Aredo (1993) offered essential observations on Iqub, while Pankhurst (2009) traced the development of Iddir, yet thorough nationwide research is still limited. Current studies typically concentrate on the funeral roles of Iddir or the credit-sharing systems of Iqub, frequently overlooking their wider developmental effects, including their contributions to community infrastructure, gender empowerment, and informal governance (Tsegaye, 2010). On a methodological level, studies of Iddir and Iqub often rely on qualitative ethnographic accounts or small-scale case studies. While these approaches capture rich cultural detail, they rarely provide systematic, comparative, or longitudinal data (Dejene, 2011). This limits the generalizability of findings and weakens their influence in policy arenas that favor quantitative evidence.

Ultimately, the gap in policy is notable. Ethiopia’s National Social Protection Policy (2014) acknowledges the significance of community support mechanisms broadly yet fails to establish a definitive structure to incorporate Iddir and Iqub into official social protection or financial inclusion initiatives (MoLSA, 2014). This has led to redundant efforts: for instance, donor-driven microfinance initiatives frequently falter as they overlook established Iqub systems (Aredo, 1993). Likewise, government-sponsored safety nets like the Productive Safety Net Programme (PSNP) offer restricted coverage, resulting in Iddir becoming the primary method for risk-sharing among the most disadvantaged families (World Bank, 2019). If policymakers do not recognize and back these institutions, Ethiopia may end up creating parallel systems instead of utilizing synergies.

In summary, the sidelining of Iddir and Iqub within Ethiopian development discussions illustrates a mix of theoretical oversight, insufficient empirical research, methodological constraints, and gaps in policy. This research aims to fill these gaps by examining the historical and modern roles of Iddir and Iqub, evaluating their impact on social protection and community development, and suggesting approaches for improved incorporation into national development policies.

The primary aims of this research is to thoroughly examine the function of Indigenous Institutions (Iddir and Iqub) in promoting Social Capital, Resilience, and Development in Ethiopia, using the following themes as a foundation:

Theoretical Frameworks

Institutional Economics: stress the importance of both formal and informal institutions in influencing economic behavior and developmental results. As stated by North (1990), institutions represent “the rules of the game” that organize human interactions, diminish uncertainty, and influence incentives. Viewed this way, Iddir and Iqub can be seen as informal institutions that have developed to lower risk, decrease transaction costs, and improve economic collaboration when robust state-driven mechanisms are lacking. These establishments demonstrate how informal norms and regulations can replace lacking or ineffective formal structures (Helmke & Levitsky, 2004). he endurance and flexibility of Iddir and Iqub throughout the years highlight their institutional effectiveness in meeting local demands where official institutions have been less successful (Aredo, 1993; Dejene, 2011).

Theory of Social Capital: The theory of social capital offers an alternative perspective to comprehend the developmental function of indigenous organizations. Putnam (1993) describes social capital as the networks, values, and trust that enable collaboration for shared advantage.

Development anthropology:  is based onmcultural integration of institutions and advises against overlooking traditional practices as outdated elements incompatible with modernization. Ostrom (1990) contends that communities can create strong, self-regulating systems for handling shared resources, disputing the belief that outside intervention is always required.  From the viewpoint of development anthropology, indigenous institutions signify culturally suitable, community-led methods of development that can enhance formal state and market frameworks. (James, 2011). This framework emphasizes the significance of integrating formal policies with local customs by placing Iddir and Iqub in wider cultural contexts to promote sustainability and community ownership.

MATERIALS AND METHODS

This study was conducted in Woldia City, North Wollo Zone, Amhara Region, Ethiopia. Woldia is an urban center with diverse social and economic activities, making it an appropriate site for exploring the functions, contributions, and challenges of indigenous financial and social institutions such as Iddir and Iqub. This study employed a qualitative research design, combining both secondary and primary data collection methods to ensure a comprehensive understanding of the functions, contributions, and challenges of Iddir and Iqub in Ethiopian society. While the desk-based review of existing literature provided a strong foundation for analyzing institutional evolution, primary data were incorporated to validate insights and capture lived experiences and local perspectives more directly, thereby addressing gaps identified in prior studies. Primary data were collected through key informant interviews, semi-structured interviews, and focus group discussions. Key informant interviews were conducted with community leaders, Iddir and Iqub executives, and local officials to gain insights into institutional governance, roles, and linkages with broader social systems. Semi-structured interviews allowed flexibility to explore participants’ personal experiences while ensuring coverage of core themes such as social protection, economic contributions, and institutional constraints. Focus group discussions facilitated collective reflection, highlighting shared practices, perceptions, and gender dynamics, while also enabling the identification of divergent perspectives within communities.

A total of 50 participants were engaged in the study using purposive sampling. This approach was chosen because Iddir and Iqub members, leaders, and stakeholders hold unique knowledge and experiences that are not evenly distributed in the general population. By intentionally selecting participants with relevant expertise and lived experiences, the study was able to generate in-depth, context-specific insights that random sampling would not have captured. The inclusion of diverse participants (by age, gender, and social role) ensured representation of multiple perspectives, particularly addressing concerns about gender inequalities and barriers to women’s leadership within these institutions. The combination of desk-based review and primary empirical data collection strengthened the validity and richness of the findings. It enabled triangulation of information, reduced the risk of overreliance on theoretical interpretations, and brought forward nuanced voices from the community. This methodological approach also aligns with the study’s objectives of exploring both the institutional evolution and the lived realities of Iddir and Iqub in contemporary Ethiopia.

Data Analysis

The extracted data were thematically analyzed through a process of coding, categorizing, and organizing information in direct relation to the research questions and objectives. Initially, raw data from interviews, focus groups, and secondary sources were carefully reviewed to identify recurring ideas, patterns, and concepts. These were then coded and grouped into broader categories, which ultimately formed the basis of the themes. The first theme, functions and roles of Iddir and Iqub in Ethiopian society, emerged from data that consistently emphasized their cultural, social, and communal relevance, particularly in fostering solidarity and collective identity. The second theme, contributions to social protection and economic development, was derived from evidence highlighting the ways in which these traditional institutions provide financial support, promote mutual aid, and enhance community resilience in times of crisis. The third theme, institutional challenges and limitations, was constructed from data reflecting structural weaknesses, organizational gaps, and the growing pressures posed by modernization and formal financial systems. Together, these themes provide a structured framework for understanding how Iddir and Iqub operate within Ethiopian society, the benefits they offer, and the constraints they face.

RESULTS AND DISCUSSION

This section discusses multiple dimensions of Iddir’s contribution to local development. Moreover it also explores The Role of Iqub in Local Development in detail as follow.

The Role of Iddir in Social Protection

Iddir associations in Ethiopia, historically established in the early 20th century, initially emerged to provide funeral support in urban areas (Pankhurst, 2009). Over time, these associations have evolved into multifaceted social institutions that serve as informal mechanisms of social protection, risk management, and community development. A desk-based review of empirical and conceptual studies reveals multiple dimensions of Iddir’s contribution to local development.Iddir associations in Ethiopia, formed in the early 20th century, were originally created to offer funeral assistance in cities (Pankhurst, 2009). Over the years, these groups have transformed into complex social entities that act as unofficial systems for social safety, risk handling, and community growth. A desk-based examination of empirical and theoretical research highlights various aspects of Iddir’s role in local development. the following story of a research participant woud strengthen this:

“I am a 46-year-old single mother living in Woldia, in the North Wollo Zone. I work as a street vendor selling vegetables, and my income is modest and unpredictable. For years, I relied solely on my daily earnings and occasional support from relatives. However, when my mother passed away unexpectedly, I realized how unprepared I was to handle funeral expenses. Thankfully, I was a member of our local Iddir association. The group immediately came to my aid—they helped organize the funeral and provided financial support to cover the costs. Beyond just the money, the emotional support from the Iddir members was invaluable. That experience made me realize that Iddir is much more than a funeral society; it is a lifeline for people like me in times of crisis. Over time, I experienced other ways in which the Iddir protects its members. When my youngest child became seriously ill and required hospitalization, members of the Iddir pooled money to help cover the medical expenses. They even allowed me to skip my monthly contribution for three months, recognizing the financial strain I was under. I also noticed that our Iddir promotes community development. Members regularly meet to discuss not only financial matters but also collective activities like neighborhood clean-ups, small savings projects, and mentoring for younger members. As a woman trying to balance work and family responsibilities, I find the Iddir to be a source of both practical help and emotional support. For me, the Iddir in Woldia has become more than an association—it is a social safety net, a risk-sharing mechanism, and a platform for community solidarity. It protects me against life’s uncertainties in ways that formal social protection programs often cannot.”

Furthermore, Key informants and focus group discussants indicated that Iddir associations have evolved into multifaceted social institutions serving as informal mechanisms of social protection, risk management, and community development. Participants highlighted several dimensions of Iddir’s contribution to local social development and cohesion.

Funeral and Bereavement Support

The primary and most acknowledged role of Iddir continues to be offering financial and logistical assistance during funerals. Participants provide minor, consistent contributions that are combined to manage funeral costs, guaranteeing that families aren’t financially strained during times of loss (Tsegaye, 2010; Aredo, 1993). This setup acts as an unofficial social insurance mechanism, shielding families from disastrous costs and averting financial downturns during unexpected crises (Dejene, 2011; Asfaw, 2016). The consistent contributions indicate significant social trust and reciprocity, showcasing deeply rooted cultural norms that support economic resilience (Putnam, 1993). Through risk pooling, Iddir facilitates resource-sharing and collective assistance, emphasizing the concept of social capital: cooperative networks lower transaction expenses and improve communal wellbeing (Woldehanna & O’Donnell, 2017). In developmental terms, Iddir functions as a local safety net that reduces vulnerability in a setting with minimal government-provided social protection.

Key informants and participants in focus group discussions consistently highlighted that the most recognized role of Iddir in Woldia is providing financial and logistical support during funerals. One elder explained, “We all contribute a small amount every month, and when someone’s family faces a loss, the pooled money covers the funeral expenses. No one has to bear the cost alone.” Participants emphasized that these contributions, though minor individually, collectively prevent families from facing severe financial strain during times of bereavement. FGD participants described this system as an informal social insurance mechanism. A mother in one discussion noted, “If a family suddenly loses a loved one, the Iddir steps in immediately. Without it, many families would fall into debt.” Several key informants connected this practice to long-standing cultural norms of trust and reciprocity, stressing that the reliability of contributions strengthens social cohesion and economic resilience within the community. Participants also mentioned the broader role of Iddir in risk pooling and resource-sharing. “Everyone helps each other, not only with money but also with organizing the funeral, preparing food, and comforting the family,” one young participant observed. This cooperative behavior reflects strong social capital, where networks of trust reduce individual burdens and enhance communal well-being.

Overall, respondents stressed that beyond funeral support, Iddir functions as a local safety net, reducing household vulnerability in a context where formal government social protection is limited. As one key informant summarized, “Iddir protects us in ways no one else can; it is our shield against unexpected crises.”

Emergency Assistance

The main and most recognized function of Iddir remains providing financial and logistical support during funerals. Contributors make small, regular payments that are pooled to cover funeral expenses, ensuring that families do not face financial burdens during periods of grief (Tsegaye, 2010; Aredo, 1993). This arrangement serves as an informal social safety net, protecting families from catastrophic expenses and preventing economic declines during unforeseen emergencies (Dejene, 2011; Asfaw, 2016). The regular contributions reflect substantial social trust and mutual support, highlighting well-established cultural norms that enhance economic resilience (Putnam, 1993). Iddir enables resource-sharing and mutual support via risk pooling, highlighting social capital’s role: collaborative networks reduce transaction costs and enhance community welfare (Woldehanna & O’Donnell, 2017). In developmental contexts, Iddir serves as a community safety net that lowers risk in an environment with limited government-sponsored social support

Community Development

Certain Iddir associations have moved from providing social support to engaging in wider development initiatives, such as minor infrastructure projects (roads, water sources), health awareness campaigns, and educational assistance (Dejene, 2011; Taye, 2012). These organizations harness shared resources and organize collective efforts to tackle community-level issues that are frequently neglected by local governmental bodies (Getachew, 2013). The involvement in public goods provision shows that indigenous institutions function beyond private social roles and can directly influence development results. Institutional economics indicates that cooperation based on trust alleviates collective action issues, thereby improving efficiency and efficacy in local development (North, 1990; Ostrom, 1990). This corresponds with Ethiopia’s decentralized governance model, which highlights local involvement in the planning and execution of development projects (World Bank, 2018).

Research participants confirmed that Iddir associations have expanded beyond their traditional role of providing social support during funerals and emergencies to actively addressing broader community needs. these associations mobilized resources, organized volunteers, and implemented local infrastructure projects to benefit households. Participants also noted that Iddir initiatives now include health awareness campaigns and educational support for disadvantaged children. Trust among members was highlighted as a key factor enabling effective coordination and overcoming collective action challenges. The following case may strengthen this idea as follow:

“I live in Woldia town. Traditionally, Iddir associations in our community were primarily concerned with providing social support, particularly helping families during funerals or other emergencies. Over time, however, Iddir groups here have expanded their role to address broader community needs. About six years ago, several neighborhoods in Woldia faced problems with poor drainage and limited access to clean water. The municipal government could not respond effectively due to resource constraints. Our Iddir association, recognizing the urgency, organized a series of community meetings, collected contributions from members, and mobilized volunteers to repair drainage canals and construct a small communal water point that now serves dozens of households. In addition, our Iddir initiated health awareness campaigns, focusing on sanitation, hygiene, and preventive care. We also supported education by providing tutoring sessions and school supplies for children from low-income families. These initiatives demonstrated that Iddir could operate beyond their traditional social support functions, directly influencing local development outcomes. This experience reflects the principles of institutional economics, showing how cooperation within trusted networks can enhance local development. “

Mediation and Conflict Resolution

In regions with inadequate formal judicial systems, Iddir leaders frequently arbitrate conflicts, including property issues and personal disputes (Pankhurst, 2009; Tilaye, 2016). This role enhances social unity and strengthens Iddir’s credibility as a reliable community organization (Bekele, 2017). Conflict resolution highlights Iddir’s socio-political function: it offers social regulation and stability, vital for facilitating development initiatives. Iddir enhances community resilience and aids in the execution of social and economic programs by promoting the peaceful resolution of conflicts (Ostrom, 1990; Asfaw & Taffesse, 2015). This highlights that indigenous institutions serve as both social and economic participants, crucial for a thorough comprehension of development in Ethiopia. Participants confirmed that in areas where formal legal systems are limited, Iddir leaders often mediate disputes, including property and personal conflicts. This role not only fosters social cohesion but also reinforces the credibility of Iddir as a trusted community institution. By resolving conflicts peacefully, Iddir contributes to social stability, which in turn supports the implementation of development initiatives. This demonstrates that indigenous institutions in Ethiopia function both socially and economically, playing a key role in promoting community resilience and facilitating local development.

Social Insurance and Coping Mechanisms

Research suggests that Iddir functions as a type of insurance for its members, protecting them from income shocks, natural disasters, or health crises (Mengistu, 2017; Kassie et al., 2020). Households involved in Iddir have a higher likelihood of receiving timely aid during emergencies than non-members, which decreases vulnerability and enhances adaptive capacity (Fekadu, 2018). These results emphasize Iddir’s role as a local risk management system. Through the aggregation of contributions, the institution shares risks among its members, embodying principles similar to those of traditional insurance yet rooted in social trust (Putnam, 1993; Woldehanna & O’Donnell, 2017). This capacity is essential in Ethiopia, where the reach of formal social insurance remains constrained, especially among rural families.

The findings above show that Iddir and Iqub play a substantial role in alleviating poverty by offering informal safety nets and financial resource access. Iqub provides members with access to one-time funds that would typically be inaccessible, facilitating investments in small enterprises, education, and home enhancements (Aredo, 1993; Teshome et al., 2015; Mulugeta, 2014). This process decreases dependence on high-interest borrowing or predatory credit options, thus improving household stability. Likewise, Iddir reduces financial burdens related to funerals and emergencies, helping families avoid debt or enduring poverty (Pankhurst, 2009; Tsegaye, 2010; Asfaw, 2016). Evidence from Addis Ababa and other cities reveals that Iddir members tend to bounce back faster from income disruptions or unexpected medical costs than those who are not members (World Bank, 2019; Fekadu, 2018). From the viewpoint of institutional economics, these roles demonstrate how informal institutions mitigate transaction costs and market failures in situations where formal financial systems are restricted (North, 1990; Helmke & Levitsky, 2004). By organizing contributions and distributions, Iddir and Iqub establish clear guidelines that improve economic collaboration among community members. Furthermore, from the perspective of development anthropology, these institutions are culturally rooted reactions to socioeconomic challenges.

In another sense, Iddir and Iqub strengthen both bonding and bridging social capital, which promotes collaboration and collective efforts. In these groups, robust trust and reciprocity guarantee adherence to contributions and mutual support. Members who default encounter social penalties or damage to their reputation, which serves as an informal means of enforcement (Putnam, 1993; Teshome et al., 2015; Woldehanna & O’Donnell, 2017). This social trust diminishes the necessity for expensive oversight and promotes collaboration, which is consistent with institutional economics theories regarding incentive frameworks and transaction costs (North, 1990). Moreover, Iddir and Iqub frequently link various community members, going beyond kinship, neighborhood, or ethnic lines. Such networks promote cooperation with NGOs, local government agencies, and various community organizations (Pankhurst, 2009; Bekele, 2017; Fekadu, 2018). These bridging ties provide access to resources, information, and wider development opportunities, enhancing resilience and fostering inclusive local growth.

Iddir and Iqub enhance official social protection initiatives, especially the Productive Safety Net Programme (PSNP), by providing support to groups overlooked by government efforts (World Bank, 2018; UNICEF, 2024). Rural families and urban informal sector employees frequently depend on these organizations for social and financial assistance, showcasing their function as efficient gap-fillers (Dejene, 2003; Berhanu, 2015). Nonetheless, the lack of structured integration may result in inefficiencies. For instance, certain NGO microfinance efforts in Addis Ababa and other regional areas did not meet their goals due to their disregard for the established networks and trust systems created by Iqub (Teshome et al., 2015; Fekadu, 2018). Viewed through the lens of institutional economics, this complementarity underscores the necessity of aligning formal and informal rules to improve efficiency, minimize redundancy, and optimize developmental results (North, 1990; Helmke & Levitsky, 2004)

The key informants and focus group discussants mentioned that Iddir and Iqub serve as vital informal financial and social safety nets in Ethiopia. They highlighted that Iddir functions like a community-based insurance system, providing timely support during income shocks, health crises, or emergencies, thereby reducing vulnerability and enhancing household resilience. Iqub was noted to offer members access to lump-sum funds, enabling investments in small businesses, education, and home improvements while avoiding high-interest loans. Participants also emphasized that these institutions strengthen social trust and cooperation, ensuring contributions are honored and fostering both bonding and bridging social capital across kinship, neighborhood, and ethnic lines. These networks facilitate collaboration with NGOs, local government, and other community organizations, improving access to resources and development opportunities. Furthermore, informants observed that Iddir and Iqub complement formal social protection programs like the Productive Safety Net Programme (PSNP) by filling gaps for underserved populations, although integration with formal initiatives remains limited. Overall, participants confirmed that these indigenous institutions mitigate financial risks, promote collective action, and enhance local development through culturally rooted, trust-based mechanisms.

The Role of Iqub in Local Development

Access to Finance

In Ethiopia, a large segment of the population, particularly in rural regions, is unable to access formal financial institutions because of issues like geographical isolation, insufficient collateral, and strict loan requirements. Iqub fills this void by offering a community-oriented savings and loan system that does not need official paperwork or guarantees. Members consistently contribute a set amount, and the combined money is allocated to members in a rotating fashion. This system allows people to obtain lump-sum funds that can be utilized for diverse reasons, such as business ventures, educational costs, and urgent requirements. Research by Karafo (2017) reveals that in Konso, Iqub serves as the primary source of funding for Micro and Small Enterprises (MSEs), exceeding both personal savings and family assistance. This highlights the essential function of Iqub in offering financial access to individuals marginalized by formal banking systems. A research by Dibaba (2019) highlights this point by indicating that in Oromia, many farmers and small traders depend solely on Iqub for their financial requirements, especially for acquiring farm inputs and growing small-scale businesses. (Dibaba, 2019)

Entrepreneurship and Economic Empowerment

Iqub is essential in promoting entrepreneurship within its community. By granting access to one-time funds, it allows individuals, especially women and low-income earners, to invest in small businesses, acquire assets, or grow current enterprises. This financial assistance is essential in a situation where formal financial institutions frequently charge high-interest rates and demand collateral that many are unable to offer. Karafo’s research (2017) shows that Iqub plays a crucial role in funding MSEs in Konso, with members using the money for expanding businesses and covering working capital needs. In a similar vein, research by Karafo (2022) conducted in Addis Ababa revealed that women vendors in local markets significantly depend on Iqub to boost their inventory and maintain their enterprises. A detailed examination by Admasu (2021) established that Iqub contributions frequently act as the main initial funding for new enterprises in both rural and urban areas throughout Ethiopia, highlighting its significance in reducing the obstacles to entrepreneurship. (Admasu, 2021)

The following story of an informant from Zamil kebele strengthens the above:

 “I am a small-scale farmer and trader. For many years, accessing formal banks was impossible for me. I didn’t have the collateral or official documents required for a loan in Bank. I had to rely on my personal savings and occasional help from my family, which was never enough for bigger investments. In 2018 G.C, I joined a local Iqub organized in our kebele. Every month, I contributed a fixed amount alongside 20 other members, and when it was my turn, I received a lump-sum payment. That money was life-changing. I was able to buy high-quality seeds and fertilizers for my farm—things I could never afford on my own. I also invested in small trading goods, such as grains and household items, which I sold in nearby towns. Thanks to the Iqub, I gradually expanded my trading business. “

Social Bonding and Community Cohesion

In addition to its monetary roles, Iqub promotes social unity and confidence among its participants. The consistent engagement and common financial objectives foster a feeling of camaraderie and collective assistance. This social capital is essential in a community where formal institutions might be remote or inattentive to local requirements. Tadesse (2023) examines how Iqub functions as a type of financial commons, relying on trust and reciprocity principles that are essential for its success. The communal aspect of Iqub enhances interpersonal bonds and fortifies community connections, promoting social stability and collaborative efforts. Alemu (2018) presented a case study in the Amhara region illustrating how Iqub meetings served as venues for settling community conflicts and coordinating joint initiatives, like constructing a local school, showcasing its role as an extensive tool for community development. (Alemu, 2018)

Flexibility and Adaptability

Iqub’s framework offers flexibility regarding contribution sizes, duration, and distribution methods, making it suitable for the diverse needs of its members. This flexibility is especially crucial in a varied nation such as Ethiopia, where socio-economic circumstances can differ greatly between regions. Research conducted by Karafo (2017) indicates that Iqub in Konso has adjusted to the local environment by permitting members to determine the amount and frequency of their contributions, thus catering to varying financial capabilities and requirements. A recent study by Girma (2020) on the various kinds of Iqub in Tigray found that the length of a cycle and the total amount are frequently discussed according to the members’ income consistency, with certain groups permitting temporary payment delays during difficult times. (Girma, 2020)

Iqub and Women’s Economic Empowerment

Women are essential to both Iddir (funeral associations) and Iqub (rotating savings and credit associations), which are significant community organizations in Ethiopia. Their participation greatly enhances social unity, economic strengthening, and the overall effectiveness of these organizations. In Addis Ababa, research conducted by Teshome et al. (2012) revealed that more than 70% of women indicated that engaging in Iddir reduced stress and challenges during mourning, underscoring the emotional and social assistance these groups offer. Moreover, 52.5% of participants reported feeling a stronger connection to their local community due to Iddir membership, while 36.4% noted a boost in their confidence when sharing their views. These results highlight the importance of Iddir in boosting women’s social capital and community engagement. Iqub acts as an essential financial tool for numerous Ethiopian women, especially in rural regions where formal banking options are scarce. Research conducted by Karafo (2017) revealed that in Konso, Iqub serves as the primary financial institution for micro and small businesses, offering vital capital for business growth and working capital funding. This availability of financial resources allows women to participate in entrepreneurial ventures, promoting economic independence and aiding local development.

DISCUSSION

The findings of this study underscore the multifaceted roles of Iddir and Iqub in promoting local development in Ethiopia, particularly in Woldia and rural kebeles such as Zamil. These indigenous institutions not only provide financial and social safety nets but also facilitate community cohesion, entrepreneurship, and localized development projects. Iddir associations’ longstanding role in funeral and bereavement support strongly supports the principles of Institutional Economics. By pooling small, regular contributions, members create mechanisms that mitigate financial risk in contexts where formal state insurance systems are absent, aligning with North’s (1990) conception of institutions as the “rules of the game” that reduce uncertainty and shape incentives. At the same time, reliance on informal associations may partially contradict formal institutional goals if it reduces pressure for state-led social protection expansion (World Bank, 2018; UNICEF, 2024). From a Social Capital perspective, Iddir exemplifies how trust, reciprocity, and bonding networks enable resource sharing and collective action, reflecting strong social norms that formal institutions often struggle to cultivate (Putnam, 1993; Woldehanna & O’Donnell, 2017). Nonetheless, equity of access may be constrained, as marginalized households outside these networks risk exclusion (Fekadu, 2018; Teshome et al., 2015). Viewed through the lens of Development Anthropology, the culturally embedded nature of Iddir demonstrates how indigenous practices can sustain community welfare in contextually appropriate ways, challenging modernization-centric assumptions that only formal interventions are effective (James, 2011; Ostrom, 1990).

Beyond funerals, Iddir’s capacity to provide support during health crises, income shocks, and natural disasters further illustrates its role as an informal risk management institution. Its flexibility—allowing temporary suspension of contributions or additional aid during hardship—reinforces the Institutional Economics claim that informal mechanisms can effectively substitute for weak formal structures (North, 1990; Helmke & Levitsky, 2004; Dejene, 2011; Mengistu, 2017; Kassie et al., 2020). From a Social Capital viewpoint, this adaptive capacity is sustained by trust and reputational mechanisms, which strengthen reciprocity and bonding capital, although inequalities may arise if wealthier or better-connected members disproportionately benefit (Putnam, 1993; Woldehanna & O’Donnell, 2017; Tadesse, 2023; Alemu, 2018). Development Anthropology reinforces that these emergency functions reflect community-based problem solving, demonstrating culturally familiar and locally legitimate interventions that enhance sustainability and ownership (James, 2011; Ostrom, 1990).

Iddir’s engagement in small-scale infrastructure, health awareness, and educational support further supports Institutional Economics by illustrating how informal institutions can coordinate collective action to overcome local public goods provision challenges (North, 1990; Ostrom, 1990; Helmke & Levitsky, 2004; Dejene, 2011; Taye, 2012). By pooling resources and mobilizing volunteers, Iddir reduces transaction costs and addresses gaps left by local governance structures. Social Capital theory complements this view, highlighting that trust and norms enable collaborative initiatives and foster bridging networks that connect diverse community actors (Putnam, 1993; Woldehanna & O’Donnell, 2017; Bekele, 2017). However, reliance on existing trust networks may limit scalability, as projects requiring broader coordination could face challenges if social capital is unevenly distributed. Development Anthropology emphasizes that these activities represent culturally embedded, adaptive solutions, reinforcing Ostrom’s (1990) argument that communities can self-organize effectively and sustainably (James, 2011).

The role of Iddir in resolving local disputes exemplifies informal governance, supporting the Institutional Economics view that such institutions regulate interactions and manage collective action (North, 1990; Helmke & Levitsky, 2004; Ostrom, 1990; Pankhurst, 2009). Mediation strengthens cohesion and enhances the effectiveness of community projects, while Social Capital theory highlights how it consolidates bonding and bridging ties within and across networks (Putnam, 1993; Woldehanna & O’Donnell, 2017). Yet, reliance on informal mechanisms for justice may partially contradict formal legal systems, potentially undermining equity or state authority (Bekele, 2017; Teshome et al., 2015). Development Anthropology underscores that these practices are culturally legitimate, locally accepted approaches to governance that reinforce social order and resilience (Ostrom, 1990; James, 2011).

Iddir and Iqub function as informal insurance systems that protect households from income shocks and emergencies, supporting Institutional Economics by demonstrating that informal rules effectively lower risk and transaction costs where formal insurance is absent (Mengistu, 2017; Kassie et al., 2020; Fekadu, 2018; Teshome et al., 2015; North, 1990; Helmke & Levitsky, 2004). Social Capital theory emphasizes that these outcomes rely on trust and reciprocity within networks, although households outside these networks may be excluded, revealing partial inequities (Putnam, 1993; Woldehanna & O’Donnell, 2017; Fekadu, 2018; Tadesse, 2023). Development Anthropology reinforces that such practices are culturally appropriate, community-led, and enhance adaptive capacity while complementing formal social protection programs (Ostrom, 1990; James, 2011; Pankhurst, 2009).

Iqub similarly fills critical gaps in formal financial access, providing lump-sum funds without collateral and reducing credit market failures, which aligns with Institutional Economics (North, 1990; Helmke & Levitsky, 2004; Karafo, 2017; Dibaba, 2019). Yet, dependence on Iqub may partially contradict formal banking goals by reducing incentives for broader financial inclusion reforms. Social Capital theory explains its effectiveness through trust and reciprocity, which sustain voluntary contributions and collective discipline, though unequal participation may disadvantage marginalized members (Putnam, 1993; Woldehanna & O’Donnell, 2017). Development Anthropology highlights that Iqub’s culturally grounded design ensures local relevance and sustainability, demonstrating a context-sensitive approach to financial inclusion (James, 2011; Ostrom, 1990).

Iqub also enhances entrepreneurship and women’s economic empowerment by providing capital for small enterprises, demonstrating how informal institutions reduce transaction costs and facilitate economic activity (North, 1990; Helmke & Levitsky, 2004; Karafo, 2017; Admasu, 2021; Teshome et al., 2015). Social Capital theory further explains how trust and reciprocity within Iqub networks promote collective action, social bonding, and community cohesion, although unequal access may restrict benefits to more connected members (Putnam, 1993; Woldehanna & O’Donnell, 2017). Development Anthropology emphasizes that women’s participation reflects culturally embedded strategies for social and economic development, showing how indigenous institutions complement formal policies while ensuring local ownership, sustainability, and inclusive growth (Ostrom, 1990; James, 2011).

Collectively, these findings demonstrate that Iddir and Iqub operate as complementary informal institutions that mitigate social and financial risks, promote entrepreneurship, strengthen social cohesion, and foster local development. The evidence strongly supports Institutional Economics, showing how informal mechanisms reduce transaction costs, manage uncertainty, and substitute for weak formal systems, while Social Capital theory highlights the central role of trust, reciprocity, and bonding/bridging networks in facilitating cooperation and resilience. From a Development Anthropology perspective, these culturally rooted institutions illustrate the importance of integrating indigenous knowledge with formal development strategies to enhance sustainability, ownership, and community-driven outcomes. Minor contradictions exist regarding equity, scalability, and alignment with formal institutions, but overall, the findings underscore the enduring relevance and adaptive capacity of Iddir and Iqub in promoting localized development in Ethiopia.

CONCLUSION

In conclusion, this study demonstrates that Iddir and Iqub play indispensable roles in fostering local development in Ethiopia by serving as multifaceted informal institutions that combine social, financial, and cultural functions. Iddir associations, historically established to provide funeral support, have evolved into broader mechanisms for social protection, risk management, community cohesion, and localized development. Through pooled contributions, these associations reduce household vulnerability to income shocks, health crises, and other emergencies, effectively functioning as informal insurance systems where formal social protection remains limited. Similarly, Iqub addresses critical gaps in financial access, offering members lump-sum funds without collateral that enable entrepreneurship, asset acquisition, and household improvements, particularly benefiting women and marginalized populations. Both institutions rely heavily on trust, reciprocity, and social norms, strengthening bonding and bridging social capital that facilitates collaboration, collective action, and community cohesion. Beyond immediate financial support, Iddir and Iqub contribute to wider community development through infrastructure projects, health and education initiatives, conflict mediation, and culturally embedded governance, demonstrating their adaptive capacity and relevance in diverse socio-economic contexts. While some limitations exist, such as potential inequities in access and partial misalignment with formal institutions, the evidence highlights the complementary role of these indigenous mechanisms alongside formal development programs. Overall, the findings underscore that Iddir and Iqub exemplify how culturally grounded, trust-based institutions can effectively mitigate risks, promote economic empowerment, enhance social solidarity, and sustain community-driven development, offering valuable insights for integrating informal systems into broader development planning in Ethiopia.

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