Ethiopia's Fintech Sector

Ethiopia’s financial services sector has traditionally been heavily regulated and dominated by traditional commercial banks. These banks have not met the needs of the country’s over 115 million population. Until 2020, both foreign and domestic companies were not allowed to provide digital financial services in Ethiopia. Two domestic digital financial service providers have been active in the market, Telebirr and Kacha Digital Financial Service. Still, despite the presence of these service providers, almost 98 percent of transactions are done using cash. But that is poised to change. 

On December 24, 2022, Ethiopia’s Parliament approved the opening of digital financial services to foreign companies. The purpose of this new regulation is to expand financial services in geographic areas underserved by traditional banks, increase competition in the telecom industry, and facilitate the transfer of technology and knowledge.

Currently, Safaricom, the first private licensed company in the telecom sector in the country, is negotiating with the government of Ethiopia to introduce its popular M-Pesa mobile money service to the market. A second private telecom operator is expected to enter the market in the coming 1-2 years and will likely also be complementing their mobile service with digital financial services.   

The conditions and terms that state how foreign investors can get into the financial sector in Ethiopia will be clarified in a forthcoming directive developed by the National Bank of Ethiopia. It is expected that this directive will lay out capital requirements for foreign companies. Any U.S. company meeting these requirements will be permitted to provide mobile financial services in the country.

The previous regulations mandated that financial institutions be set up as share companies. However, the newly approved regulations provide exceptions for licensed telecom operators to set up as wholly owned subsidiaries. Opportunities exist for new fintech operators to provide fintech platforms to existing financial institutions or to provide mobile money services directly to consumers. 

To learn more, contact:  Yemesrach Kassu
                                       Commercial Specialist
                                       Email: Yemesrach.Kassu@trade.gov