Ethiopia is one of the fastest growing markets for mobile payments in Africa, supported by growth in ecommerce industry and reforms undertaken in recent years towards financial inclusion.
According PayNXT360 estimates, the mobile payment transaction value in Ethiopia is expected to increase at a CAGR of about 21% during 2020-2025. Over the forecast period, the market is expected to reach US$ 9.5 billion by 2025, increasing from US$ 3.7 billion in 2020.
To boost non-cash payments landscape in the country, the National Bank of Ethiopia is allowing non-banking institutions to offer digital payment services. Previously, only micro-finance and banking institutions were allowed to provide mobile payment services. The country is in the midst of a series of significant economic reforms led by Prime Minister Abiy Ahmed, who formed the government in 2018. The new directive, dated April 1, 2020, is part of the Ethiopian governments' US$10 billion home-grown economic reform.
The directive is expected to benefit the state-owned telecommunications monopoly Ethio Telecom, allowing it to move into mobile money segment. The National Bank of Ethiopia will be offering two licenses initially, provided that some requirements are met. License requirements include that the mobile payment service providers deposit capital of 50 Million Birr (US$ 1.6 million).
The directive also sets out the transaction and balance limits. The accounts have transaction limits of 8,000 Birr/day and 60,000 Birr/month. Moreover, the licensed firms should have a cap on account balances of 5,000 Birr to 30,000 Birr. Firms that receive the license from the National Bank will be able to offer cash-in and cash-out, domestic and inward international remittances, bill payments, retail payments, and over the counter transactions.
In 2018, the Ethiopian government was in negotiation with Safaricom to launch its popular mobile money service M-Pesa in Ethiopia. However, in the new directive, the National Bank said it will only allow locally owned non-financial institutions to apply for a license. All foreign-owned companies, except for foreigners of Ethiopian origin, will remain locked out.
To get access to one of the fastest-growing mobile phone services markets in the world, a number of foreign telecom operators including Safaricom, MTN, Orange, and Airtel have expressed interest in the Ethiopian market.
The mobile payment revolution started in the country with the debut of the first-ever mobile money service in Ethiopia - M-Birr. Launched in 2013, the platform has served over 2 million users allowing them to make payments for fuel, taxi rides, groceries, and airlines. The key drivers behind the success of M-Birr are the strategic partnership with Angaza and the Ministry of Finance, among others.
Angaza is a technology platform enabling pay as you go financing plans. With a population of 114 million, around 75% of the people are unbanked. This provided M-Birr an upper hand offering financial services to a huge percentage of the unbanked population through their strategic partnerships with services like Angaza. Moreover, the Ministry of Finance in Ethiopia also use M-Birr to transfer money - under the Productive Safety Net Programme, which provides financial assistance to poor Ethiopians. More than 800,000 households received money from the Ministry of Finance through M-Birr.
The percentage of mobile users has also increased substantially in the last few years. At present, there are more than 44 million mobile and 25 million internet users in Ethiopia. The growing shift towards smartphone and internet usage, along with the issuances of new licenses will boost the growth of the mobile payment industry in Ethiopia. Number of mobile payment users is expected to reach 37 million in 2025 from about 15 million currently.
The mobile money market is now opened in Ethiopia. And with a large percentage of unbanked population, the country can witness a rapid adoption of mobile money services. Moreover, it might get added support because of the growing concerns related to the coronavirus pandemic.
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