Foreign fintechs will be permitted to enter Ethiopia shortly, thanks to a recently tabled proclamation that revises a decade-old national payment system proclamation.
On Saturday, August 6, the Council of Ministers authorised a modification to the national payment system proclamation no 718/2011, which was initially published in 2011.
Here Is What You Need To Know
- When the proclamation is passed by the parliament, it will open the door for foreign investors to participate in the country’s financial systems, at least temporarily, as payment operators.
- So far, two businesses have entered the Ethiopian market as fintech operators: Ethio Telecom’s Telebirr and Kacha Digital Financial Services, which recently launched its operations.
- According to Solomon Damtew, acting director of the National Bank of Ethiopia’s Payment and Settlement System Directorate, the NBE, a regulatory authority for the financial industry, is creating clear guidelines that would enable issuing a licence for the incoming businesses.
- Even though it has only been around for a little over a year, the state-owned telecom carrier Ethio Telecom’s Telebirr has been able to convert more than half of its subscriber base to mobile money users. Additionally, the number of agents recruited by fintech or financial companies has increased by 800%, from 15,000 agents in the 2020/21 fiscal year to 156, 876 agents in just one year.
- The majority of the new agents, in Solomon’s opinion, are Telebirr-aligned.
According to Solomon, the proclamation amendment required around three months of careful labour.
- The proclamation states that national payment systems must include systems for payments, clearing, and settlement as well as for sending, receiving, and processing payment orders and money transfers in either domestic or foreign currencies.
- Additionally, the proclamation states that payment service providers, including operators, participants, issuers of payment instruments, and any other entity acting as their agent or through outsourcing arrangements, may operate fully or partially in the nation.
- Safaricom has indicated interest in participating in mobile money in the nation where the government has finally granted its request following its arrival as a first private and international investment in the telecommunications sector. As a result, it is anticipated that the Kenyan telecom company would be among the first international businesses to participate in fintech. The business is well-known for its ground-breaking M-Pesa mobile money service.
“Following the amendment of the proclamation, the ecosystem will be opened which means that highly experienced foreign companies will enter into the Ethiopian payment system,” Solomon added. “The move will uplift the success that we have so far achieved on the sector and will foster the use of a cashless economy in addition to ensuring financial inclusion besides strengthening the digital payment ecosystem.”
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Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
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