Ethiopia has begun amending its national payment law to allow Safaricom to enter the 110 million-user market with its successful mobile payment network, M-Pesa. Ethiopia’s central bank, according to sources, has written a bill that will allow foreign investors to offer mobile money services, promoting corporations such as Safaricom that are planning to enter the nation this year.
As stated in the State-sponsored Bill, “Foreign nationals may be allowed to invest in a payment instrument issuer or a payment system operator business, or establish a subsidiary which shall be licensed as a payment instrument issuer or payment system operator.”
M-Pesa, which was launched in Kenya in 2007, has now established a solid foothold in the country and across East Africa. Safaricom CEO Bob Collymore had stated that M-Pesa needs to be more inventive or risk dying, and cited Ethiopia as a potential expansion target.
Safaricom’s launch of M-Pesa in Ethiopia would be a big success for the Kenyan telecommunications company. Ethiopia’s vast population, the second-largest in Africa behind Nigeria, attracts corporations in particular. The country’s 114.1-million population currently has a mobile phone penetration rate of 51.4 percent.
By introducing the Bill last month, the National Bank of Ethiopia seeks to eliminate the last legal impediment to Safaricom. “So far, there is no law that enables foreign operators like M-Pesa to acquire a licence in Ethiopia. If the new amendment is approved, it will allow M-Pesa to get a licence in Ethiopia, “Marta Hailemariam, head of payment settlement at the National Bank of Ethiopia, noted.
Historically, countries with strict rules have hindered the debut of mobile money services, with industry watchdogs occasionally cautious about digital transactions and their economic consequences.
Nations are gradually realising how a mobile-first approach benefits banks in the long term. Additionally, recreating Kenya’s extensive agent network in Ethiopia and doing it rapidly will be a crucial issue for Ethio Telecom to resolve.
Mukhisa Kituyi, secretary-general of the United Nations Conference on Trade and Development, stated in 2018 that some African countries’ central banks are impeding financial development by failing to adapt to the advent of non-bank-led services.
While operator-led services have been credited with increasing access to financial services for unbanked populations in countries like Kenya, regulation and acceptance vary significantly across Sub-Saharan Africa.
The Nigerian Central Bank, CBN, published Regulatory Guidelines and a Framework for Mobile Money Services in 2021. The CBN stated that the introduction of mobile telephony in Nigeria, as well as its rapid expansion and adoption, reinforced its decision to release the framework, as it will establish an enabling environment for the orderly introduction and management of mobile money services in Nigeria.
The Framework outlines the regulatory environment as a policy path toward achieving mobile payment service availability, acceptance, and usage. However, the Mobile Money Services Guidelines stipulate that Mobile Money Operators (MMOs) are prohibited from engaging in certain activities.
For example, issuing loans, advances, and guarantees in any form (directly or indirectly); Accepting deposits in foreign currency; Deal in foreign currencies except as specified in Section 4.1 (ii & iii) of the enacted Guidelines for the Licensing and Regulation of Payment Service Banks in Nigeria; Insurance underwriting; Accept any closed-system electronic value (for example, airtime) as a deposit or payment method; Create any subsidiary; Conduct any other transaction not expressly permitted by these guidelines or any other actions that the CBN may prohibit.
The framework established two operational models for MMS in Nigeria, which are as follows:
- Bank Led — Initiated by a bank or a group of banks with the objective of leveraging MMS to deliver financial services.
- Non-Bank Led — where the lead initiator is a corporate entity fully licensed by the CBN.
The framework identifies its objectives as:
- The provision of an enabling environment for the adoption of MMS thereby reducing cash dominance in the Nigerian Economy
- To ensure that mobile money services develop in a structured and orderly manner with a clear definition of the participants, their roles and responsibilities
- To specify the minimum technical and business requirements for the various participants in the industry
- To provide guidelines for the operation of MMS from implementation to completion
- To promote the safety and effectiveness of mobile money services and enhance user confidence in the services
While the framework recognises the paradigm in which Mobile Network Operators (MNOs) function as initiators, it also stipulates that such a model is not permitted to operate in Nigeria. Only organisations approved by the CBN are permitted to supply MMS, assuring the CBN’s complete command over monetary policy operations, risk reduction, and compliance.