For the first time in history, Ethiopia would be letting foreigners into its financial services. According to a source, Ethiopia’s proposed new telecom licenses will enable licensees to sell mobile money services.
They will also not be limited to using Ethio Telecom’s infrastructure, according to the same Bloomberg article.
Ethiopia had received harsh criticism from a number of authorities, including the World Bank in February, for its policy of prohibiting new operators from offering mobile money and restricting infrastructure competition.
In a hard-hitting blog post published by the World Bank, Ousmane Dione, the country director for Eritrea, Ethiopia, South Sudan, and Sudan, cautioned that the policy, which has now apparently been abandoned, “may slow down network rollout, especially in rural areas.”
Only two bidders — an MTN group and a Vodafone group — submitted license applications by the deadline in late April.
MTN made it clear that it is sponsored by the Silk Road Fund, a Chinese state-owned investment fund aimed at boosting investment in countries along China’s One Belt, One Road economic development initiative.
Read also:MainOne’s Cloud Connect to Increase Business Connectivity in West Africa
The Vodafone consortium is funded by the International Development Finance Corporation (IFC), which has provided a $500 million loan, and the CDC, which is backed by the UK government.
Foreign (Non-Ethiopian) Investors Are Barred From Participating In Ethiopia’s Fintechs
Despite the latest move to allow foreign participation in the provision of mobile money services, Ethiopia (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.
Read also:MainOne’s Cloud Connect to Increase Business Connectivity in West Africa
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.
Although not yet there, it does seem that the days of bar against foreign participation in the country’s financial services sector are numbered.
Ethiopia financial foreigners Ethiopia financial foreigners
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