Ethiopia’s heavily regulated financial service sector is one of the least developed on sub-Saharan Africa with over 80 million people from a population of 94 million still unbanked, despite the rapid economic growth the horn of Africa nation has experienced over the last decade.
Mobile money innovations that have revolutionized financial inclusion in neighboring Kenya, Uganda, Tanzania and Rwanda have not taken hold in Ethiopia as the telecommunication services sector remains closely held by a government reluctant to allow private investors in.
As a nation, Ethiopia’s 7 percent average annual economic growth has been one of the best in the region over the decade as it recovered from poor governance by earlier regimes and chronic droughts that devastated most of the country’s farming regions.
“The economy is growing and people need to transact money fast,” Dawit Nehemia, technical, marketing and research director at SS Communications, told HowWeMadeItInAfrica.com.
Only recently have regulators and banks become a bit more receptive to the introduction of mobile financial services, opening opportunities for businesses like SS Communications. There is still a lot to be done given that mobile money has barely started, inter-bank transactions are non-existent and only a few people have debit cards.
The Ethiopian government is now pushing for more card payments and has opened up the market for private companies to supply point-of-sale (POS) terminals to both businesses and commercial banks to enable shopping using debit and credit cards.
The system will allow customers to access their money via ATMs, mobile phones and internet channels, something that has been lacking in the country and was hurting businesses.
“That will be a game-changer. It will make more people appreciate the benefits of card and electronic payments,” Nehemia told HowWeMadeItInAfrica.com.
Already to companies have introduced mobile money applications in to the Ethiopian market. BelCash, a subsidiary of a Netherland firm with the same name, and MOCC ICT launched helloCash and M-Birr in December.
But with a low mobile phone penetration of just 25 million subscribers, the impact of mobile money might not be as fast as in neighboring countries where mobile phone use was way higher even before mobile banking was introduced.
Foreign investor are, however, yearning for a chance to set up shop in Ethiopia’s financial services industry with an eye on the banking and insurance sectors. The government is slowly loosening its grip on the industry and has allowed Togo’s Ecobank and South Africa’s Standard Bank to opened representative offices in the country.