PayWay Ethiopia, a digital payments solution provider, has signed a funding agreement to become one of the Li-Way program’s implementing partners. MercyCorps, the Netherlands Development Organisation, SNV, Save the Children International, and TechnoServe are among the participants in the LI-WAY initiative, which runs for five years.
In Addis Ababa, the program leads to a long-term reduction in poverty, improved gender ties, and social stability. The program aims to better the lives of 200,000 people living in poverty, with half of them being women and the other half being youth.
To introduce the LI-Way program, the consortium is looking for capacity-building and financial facilitators. PayWay Ethiopia will establish an agency network that will promote payment through Addis Ababa while also creating employment. Awash Bank, SNV Li-Way, and iceaddis are among the other implementing partners.
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Hilina Damte, PayWay Ethiopia’s Managing Partner, sees hiring, training, and developing new agents as a way to expand the company’s operations while also installing new payment systems across Ethiopia. PayWay ET currently has 50 agents with plans to expand to 100 in the near future.
The latest investment follows that made in another fellow country startup, Afripay recently.
Foreign (Non-Ethiopian) Investors Are Barred From Participating In Ethiopia’s Fintechs
The fact that the investment in PayWay ET came by way of grant and not equity may lie in the fact that the East African country (which is Africa’s second most populated country after Nigeria) continues to place a bar on foreigners owning stakes in banking, insurance, brokerage services, and legal consultancy businesses.
In October 2020, after series of negotiations and deliberations, the National Bank of Ethiopia (NBE), finally granted a license to state-owned telecoms company, Ethio Telecom, to start mobile money service in the country. This followed the issuance, in April 2020 by the bank, of a regulation called Licensing & Authorization of Payment Instrument Issuers. For the first time in Ethiopia’s history, the regulation allowed 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.
“As part of the application process,” the directive read, in parts, “the National Bank, may request for a preliminary meeting and demonstration of the intended payment instrument to be issued, its related services, products as well as operation. Based on requests made and written approval of the National Bank, a payment instrument issuer may be allowed to provide cash-in and cash-out; local money transfers including domestic remittances, load to card or bank account, transfer to card or bank account; domestic payments including purchase from physical merchants, bill payments; over-the-counter transactions; and inward international remittances services.”
The regulation has 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.
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The National Bank of Ethiopia also issued, that same year, a “Licensing and Authorisation of Payment System Operators Directive (ONPS/02/2020), allowing financial technology companies (fintechs) to start off payment processing and related services in Ethiopia.
Five licenses under the payment system operator directive include National Switch, Switch Operator, ATM Operator, POS Operator, and payment gateway license.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer