ADDIS ABABA — Ethiopia is one of the few remaining African countries to introduce mobile banking. With the booming economy and a population of 80 million this country could be the next gold mine for mobile banking companies.
Mobile banking has proved to be a lucrative venture in the developing world, where large parts of the population belong to the so-called "unbanked." In Africa, only Ethiopia and Zimbabwe do not provide mobile money services. That will change soon for Ethiopia.
BelCash and M-Birr are mobile banking technology providers that have been in Ethiopia for the last three years to set up mobile banking and mobile money services.
Dutch company BelCash is focused on mobile banking, working in partnership with banks to provide easier access to finance through bank accounts. Ireland-based M-Birr is a mobile money service that works with micro finance institutions where no registration at a bank is needed.
The companies will face several challenges in Ethiopia. Half of the population is said to be illiterate, and the telecom coverage in the country is far from perfect. The pressure on the telecom network will increase as the number of Ethiopians owning a mobile phone increases.
In the last four years, the number grew from three million to 17 million users. And Ethiopia’s telecom provider, Ethio Telecom, expects that number to grow to 40 million in the next three years.
BelCash founder Vince Diop does not believe a limited network or high illiteracy rate will be a barrier for introducing mobile banking.
“We have multiple channels that people can use, like sms, ivr, so that if one channel is not working properly than still they have other options,” Diop said.
The government regulates Ethiopia’s telecommunications market, meaning that there is only one telecom provider and others are not allowed. Both BelCash and M-birr are strictly technology providers. M-Birr General Manager Thierry Artaud sees the regulated market as a benefit.
"If you look at your neighbors, Kenya, Tanzania Uganda, they all have multiple mobile operators and they all have mobile money services and even multiple mobile money services," said Artaud. "If the country was deregulated, the big operators like Vodafone, MTN would come to Ethiopia and launch a mobile money service. Because its not deregulated we are protected."
Ethiopia has looked at other developing countries to learn from their experiences with mobile banking. The National Bank of Ethiopia visited Kenya, Pakistan and Brazil.
Frezer Ayalew is the director of micro-finance supervision of the National Bank of Ethiopia. He says mobile banking services could be a positive development for Ethiopia.
“Financial service accessibility is very necessary in order to smoothen consumption, built household assets. And it’s critical for people to have access to finance," said Ayalew. "For the economy it has great contribution in terms of mobilizing domestic savings with these services.”
Ethiopia also strongly regulates its financial institutions. The National Bank of Ethiopia just finished a draft directive on how mobile banking services should be regulated as more companies have shown interest in starting mobile banking services.
Frezer says the directive is needed to face possible challenges.
"The overall purpose of the directive is to make sure that the financial institutions are providing the service in a prudent and safe manner so that the stability of financial system is maintained," said Frezer.
Artaud says that until the directive has been finalized, M-Birr is allowed to start a pilot.
“People will be able to start registering for real, with real money and transferring money throughout the country," said Artaud. "The only limitation will be where the branches are, because we are talking about roughly thirty points of sales for the pilot.”
The National Bank of Ethiopia expects that the directive will be approved in the coming months.