Ethiopia Opens Floor for Mobile Money for Telcos, Kills M-PESA Launch Prospects

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As of April 2020, Ethiopia has allowed new players to take part in the mobile space. New entrants, in this case, are non-financial organizations who until now, were not allowed to run mobile money services.

The directive, which is in line with the country’s $10 billion economic boost agenda, is targeting telcos. The development was announced by the National Bank of Ethiopia.

The announcement means that the likes of Ethio Telecom, which is owned by the state, will start dealing in mobile money services that have proved successful for companies that started doing so years earlier. It is also a lucrative investment as we have to learn as the likes of Kenya’s Safaricom profits are mostly made from M-PESA as of its last financial announcement.

Ethiopia’s central bank agenda here is to liberalize the telecoms space by giving out two mobile money licenses. Bloomberg reports that the state seeks to sell a stake in Ethio Telecoms. Last year, we learnt that Safaricom had been given the go-ahead by the Ethiopian government to either buy a stake in the named telco that is up for sale or starting operations as a new company.

Safaricom, MTN and Orange SA had previously hinted plans to enter the Ethiopia telecoms space. These companies, which are very successful in the areas they serve in continental Africa, run robust mobile money products.

The announcement strictly limits the launch of mobile money products and services to local organizations, effectively kicking out any prospects of Safaricom’s M-PESA launching there.

“This directive effectively excludes foreign fintech and telecom companies from reaping the business benefits,” says Bahakal Abate, an Ethiopian lawyer to Reuters.

Besides the local ownership, Ethiopia, which has a population of about 105 million people, has detailed license requirements, including a minimum capital of $1.5 million. Permitted companies will also be required to offer credit, insurance and saving services.