The National Bank of Ethiopia (NBE) has withdrawn its ban on the digital remittance platforms MamaPays and CashGo, which work in collaboration with the Bank of Abyssinia (BoA).
The regulator, which earlier viewed the platforms providing services for which they did not have a permission, overturned its decision three months after it ordered their closure.
The app’s legality in providing remittance services has now been settled, and both Mama Pay and CashGo are back in business.
“It’s fantastic news to learn that the central bank has lifted the suspension of remittance transfer platforms, allowing the appropriate venue to begin operations,” commented Bersufekad Getachew, CEO of Eaglelion, the IT business behind CashGo, on LinkedIn.
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According to Addis Fortune, who reported on the ban, the National Bank’s Foreign Exchange Monitoring & Reserve Management summoned Abyssinia to clarify the legality of the remittance operations through the apps and what distinguishes them from traditional money transfer services.
The NBE’s international remittance service law requires banks to engage in international remittance services only after cooperating with an internationally licensed “International Remittance Service Provider,” such as Western Union.
The NBE certifies approximately 72 international remittance service providers to Ethiopia, although CashGo and MamaPays were not among them. The rule, which failed to lay out a clear manner for alternative remittance mechanisms to work in Ethiopia as well as for domestic enterprises to launch their own services, was blamed for the restrictions.
“Regulation and Innovation have always clashed,” stated Vincent Diop, CEO of BelCash, in one telegram group.
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According to a UNCDF study, an estimated 1.3 million Ethiopian migrants worldwide send up to USD 5 billion back to Ethiopia each year, accounting for more than 5% of the country’s GDP and one-quarter of its foreign exchange profits.
However, the cost of sending money to Ethiopia from Europe, the Middle East, and North America averages 7%, 4%, and 5% of the transaction value, respectively.
The greatest winners in remittance markets have historically been a few corporations whose near-monopoly costs the African continent roughly $2 billion in remittance fees each year.
Remittance Service Providers (RSPs), such as Western Union and Money Gram, also dominate the Ethiopian remittance business.
These service providers work with local banks to facilitate international transactions. In recent years, mobile money platforms like as Hello Cash, CBE Birr, Amole, and Awash Birr have implemented remittance services in collaboration with international remittance and cross-border payment service providers.
Ethio Telecom’s Telebirr has launched a remittance service in collaboration with Remitly and Thunes, with additional carriers anticipated to join.
SWIFT facilitates the vast bulk of the top players’ remittances to Ethiopia. This payment technology enables banks all across the world to send messages and communicate safely and rapidly about cross-border payments.
Local IT companies who have recently entered the remittance industry have figured out a low-cost and speedy remittance solution using international payment gateways rather than SWIFT.
Enter CashGo and MamaPays. CashGo is a remittance and crowdfunding website launched in collaboration with EagleLion, a local technology business, and Bank of Abyssinia. Belcash Technology Solutions and Abyssinia offer MamPays, another remittance platform.
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People can use their mobile phones to send money using their Master Card or Visa Card. This card-based remittance is frequently instant, and the receiver is credited in Birr to their Abyssinia account. These platforms charge less for remittance transactions than traditional RSPs such as Western Union. MamPays charges a one-time fee of one dollar per transaction, whereas CashGo charges a 1.5 percent service fee.
MamaPays had 20,000 downloads and 200,000 dollars in transactions in the month before the regulator ordered its suspension.
“We are pleased that the central bank values the transfer protocols’ efforts to enhance remittances. It is an undeniable fact that remittances are an important tool in aiding the general economic health,” Bersufekad said.
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.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard. You can book a session and speak with him using the link: https://insightsbyexperts.com/view_expert/charles-rapulu-udoh