ETHIOPIA – The National Bank of Ethiopia (NBE) has finally granted a license to the Ethio Telecom to start mobile money service in the East African country.

 Despite being the second most populous country in Africa with a population of more than 109 million, only about 33.86% of Ethiopian adults has formal accounts at financial institutions in Ethiopia, compared to the neighbouring countries like Kenya with over 82%.

The country has also been largely left out of the booming mobile money market across the East African region.

As of 2019, the total value of mobile money transactions reached $17 billion in Kenya, $12 billion in Tanzania and $5.9 billion in Uganda, even war-torn Somalia with  a meagre population of 15 million, recorded approximately 155 million mobile money transactions, worth $2.7 billion every month in 2018.

In 2019, the Global System for Mobile Communications (GSMA) declared East Africa number 1 in the world in terms of transaction volume and value of mobile money.

With more than 102 million active accounts, generating more than 17.1 billion transactions — an unmatched $293.4 billion in value and a 24% increase from 2018 — the region is the highest of any other sub-regions in the world but none of these included Ethiopia.

In a 2018 report, GSMA described Nigeria, Ethiopia and Egypt home to a combined adult population of over 242 million as Africa’s mobile money sleeping giants. 

Ethiopia’s low rate of mobile money usage could be attributed to the rigid regulatory walls that have ensured monopoly and lack of innovation as telecommunication aided by enabling legislations, has particularly driven the widespread adoption of the relatively new financial service type across Africa.

In April 2020, the National Bank of Ethiopia issued a regulation called Licensing & Authorization of Payment Instrument Issuers and for the first time in Ethiopia’s history, the regulatory regime will allow mobile money transactions.

However, there is a caveat: any company interested in the new financial service regime must set up a trust account with a deposit money bank in Ethiopia.

The regulation also opened up the country’s financial services sector to include that a licensed payment instrument issuer may, with the relevant agreement with regulated financial institutions and pension funds, be allowed to provide micro-saving products; micro-credit products; micro-insurance products; or pension products in the country. 

Banking, insurance, brokerage services, and legal consultancy remain off limits for foreign investors, according to a new set of investment rules published on the Ethiopian Investment Commission’s website. 

The implication of this is that the two telcos to be selected from the ongoing licensing process in Ethiopia will not be allowed to engage in mobile money services.

The Ethiopian Ministry of Finance is also in the process of partially privatising Ethio telecom.

To effect this, the ministry has engaged Deloitte Consulting as its transaction advisor to source a strategic partner that would acquire 40 percent stake in Ethio Telecom. 

However, it is not yet clear if the international firm that would acquire stake in Ethio Telecom would indirectly be permitted to engage in mobile money business. 

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