Ethiopia’s leading electronic payments platform has secured a grant from the African Development Bank (AfDB) which will help electronic payments in Ethiopia to get a facelift with the approval of a $2.33 million grant by the African bank. EthSwitch which is the official backbone for e-payments providers and end-users in the country runs platforms such as Ethiopay, the card scheme that helps Ethiopian banks issue payment cards. As the country’s national payment switch, EthSwitch also handles dispute resolution for financial institutions.
Ethiopia’s central bank, the National Bank of Ethiopia facilitated EthSwitch’s establishment in 2011 and owns a 46% stake in the company, while commercial banks (about 17 of them) in Ethiopia own the rest. The intention was to create a modern national payments system and accelerate financial inclusion in the country. Since then, EthSwitch has created a common network for ATMs and POS terminals operated by all Ethiopian banks.
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AfDB’s grant to EthSwitch comes from the Africa Digital Financial Inclusion Facility (ADFI), a fund launched in 2019 in partnership with the French Development Agency, the French Treasury, the Ministry of Finance of the Government of Luxembourg, and the Bill and Melinda Gates Foundation. ADFI aims to bring banking services to Africa’s 332 million unbanked people. The EthSwitch project is expected to simplify the distribution of social benefits, pensions and other government payments, as well as power e-commerce, transport systems, and utility bills payments.
According to Sheila Okiro, ADFI Fund’s coordinator, the EthSwitch project has the potential to “change the digital payments landscape in Ethiopia.” The project is to be implemented over three years, according to AfDB’s statement. The grant comes at a time of liberalization in Ethiopia’s technology industry.
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In February, the Ethiopian Communications Authority (ECA) announced that it had shortlisted six providers of telecommunications services for a private telecoms license. Ethiotel, the state-owned company, has been the sole provider of internet and telephone services pretty much since it was established in 1952. Innovation in digital payments has proceeded gradually in Ethiopia. Until September 2020, Ethiopians could not use their cards to buy goods and services at POS terminals operated by any bank.
That situation changed after the National Bank of Ethiopia commercialized the process of buying POS machines. After achieving that interoperability milestone, EthSwitch is now reportedly trying to create a similar system for mobile and internet banking that could enable transactions between accounts, between wallets, and from an account to a wallet.
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Ultimately, the EthSwitch project could increase the overall involvement of private companies in Ethiopia. EthSwitch’s shareholding structure makes it possible for banks, microfinance institutions and non-banks to have a share and a say, subject to the National Bank of Ethiopia’s supervision. AfDB’s funding for EthSwitch is one of two ADFI grants for national technology infrastructure projects in Africa. The bank approved a $1 million grant for AI-based systems for processing customer complaints. The beneficiaries are the central banks of Ghana and Rwanda, and the Competition and Consumer Protection Commission of Zambia.
Kelechi Deca
Kelechi Deca has over two decades of media experience, he has traveled to over 77 countries reporting on multilateral development institutions, international business, trade, travels, culture, and diplomacy. He is also a petrol head with in-depth knowledge of automobiles and the auto industry