New proclamation to pave way for foreign fintechs
Foreign fintechs are soon to be allowed entry following the newly tabled proclamation which revises a decade old national payment system proclamation. During the latest session held on Saturday August 6, the Council of Ministers approved the amendment for the national payment system proclamation no 718/2011 that was first issued in 2011. When the proclamation is ratified by the parliament it will pave a way for foreign investors to get involved on the country financial systems at least this time around as payment operators.
So far there are two companies which venture in Ethiopia as fintech operators; Ethio Telecom’s Telebirr and Kacha Digital Financial Services, which recently introduced its operation. Early this week, Solomon Damtew, Acting Director of Payment and Settlement System Directorate at National Bank of Ethiopia (NBE), said that the proclamation amendment will be a game changer since it allows well known and experienced foreign companies to invest on the market.
“Following the amendment of the proclamation, the ecosystem will be opened which means that highly experienced foreign companies will enter into the Ethiopian payment system,” he said.
“The move will uplift the success that we have so far achieved on the sector and will foster the use of a cashless economy in addition to ensuring financial inclusion besides strengthening the digital payment ecosystem,” he added. According to Solomon, NBE, a financial sector regulatory body, is developing detailed directives that will allow providing a license for the incoming operators.
Despite being about 14 months in, the state owned telecom provider, Ethio Telecom’s Telebirr has been able over half of its subscriber to mobile money users. The number of agents that are hired by fintech or financial firms has also shot up by 800 percent to reach 156, 876 in just a single year’s time from about 15,000 agents in the 2020/21 financial year.
According to Solomon, most of the new agents are aligned with Telebirr. Solomon told Capital that the proclamation revision has taken about three months of prudent work. According to the proclamation, national payment system consist sending, receiving and processing of orders of payment or transfers of money in domestic or foreign currencies, and issuance and management of payment instruments and payment, clearing and settlement systems.
It added that payment service providers, including operators, participants, issuers of payment instruments and any third party acting on behalf of them, either as an agent or by way of outsourcing agreements, may entirely or partially operate in the country.
On its entry as a first private and foreign investor to the telecommunication industry, Safaricom has expressed its interest to be a mobile money player in the country to which the government has finally given a green light to its demand. As a result, the Kenyan telecom brand is expected to be one of the pioneer foreign companies to invest as a fintech. The company is popular for its revolutionary M-pesa mobile money service.