The mobile financial service landscape in Ethiopia is experiencing a shake-up as the National Bank of Ethiopia (NBE) has recently issued a mobile money-service license to M-Pesa Mobile Financial Service, provided by Kenya-based Safaricom. Previously, only state-owned Telebirr, a part of the Ethio Telecom network, dominated this space. Safaricom not only succeeded in cracking the seemingly impenetrable fortress of Ethio Telecom’s monopoly but has also bolstered Ethiopia’s shift towards greater digitalization in finance.
While Safaricom’s 3 million user base may appear small compared to Ethio Telecom’s 54 million users for a country of 118 million, the fact that the government is now reportedly considering the sale of a 45% share in Ethio Telecom speaks volumes. Safaricom paid a hefty sum of $150 million for the mobile money-service license and plans to release the M-Pesa service in the country within the year. With M-Pesa already available in nine African countries and Afghanistan, this expansion represents considerable progress for financial services accessibility for many Ethiopians, regardless of whether they possess a bank account or not.
Despite the excitement surrounding M-Pesa’s entry into the Ethiopian market, concerns over the murky legal status of crypto assets in the country persist. The NBE, however, seems determined to push forward with the development of Ethiopia’s digital finance ecosystem. In a statement, the NBE said, “We will strongly support the spread of digital payment systems as a substitute for cash-based transactions within the economy.”
As Ethiopia slowly embraces digitalization in finance, blockchain-based payments platform Fuse announced its plan to introduce ChromePay’s decentralized identity service to the country. Additionally, local Project Mano organization advocates for Bitcoin adoption, and the Cardano blockchain has invested heavily in infrastructure to benefit government services in Ethiopia.
While M-Pesa’s arrival in Ethiopia has the potential to significantly boost digital inclusion and innovation, it inevitably poses a threat to existing financial institutions like the predominant state-owned Telebirr. Furthermore, the gradual rise of digital currencies and blockchain technology may profoundly impact the overall financial ecosystem.
With the Ethiopian government newly open to private mobile financial services and digital payments, the future of finance in the country looks promising. However, with the legal status of cryptocurrencies yet to be clarified, tensions within the financial landscape may intensify. As M-Pesa makes its foray into Ethiopia, only time will reveal how this move will reshape the digital finance ecosystem and the inherent challenges that lie ahead.
Source: Cointelegraph
