The new directive issued by the National Bank of Ethiopia (NBE) last week expanding the use of mobile money puts Ethio telecom in a dilemma while it is in the process of being partially privatised.

The 33-page directive, dubbed the Licensing & Authorization of Payment Instrument Issuers, allows transactions to be performed through mobile phones after customers deposit a sum with an agent. Financial transactions using any mobile money service will use the banks as a trust account for the deposited funds.

It also grants licenses to non-financial institutions, including Ethio telecom, that are fully owned by Ethiopian nationals, the diaspora or jointly to act as agents in conducting mobile money transactions.

Ethio telecom, which has a total of 44 million voice subscribers and 23 million data and internet users, must amend its establishment regulations to adjust itself to the launch of the service, since it is limited from venturing into mobile money services.

However, due to the ongoing privatisation process of the state giant, Ethio telecom will soon have to drop out, since it cannot fulfill the requirements of the license. When the foreign nationals buy out its shares, the company will have to exclude mobile banking services with the probability of having an impact on how the company is valued.

Currently, Ethiopia has a population of over 100 million, from which 20pc are banked. While the use of mobile money is at an embryonic stage in the country, Kenya has taken a leap in the past two decades. M-PESA, a mobile phone-based money transfer service, was launched in 2007 by Vodafone for Safaricom and Vodacom and now serves more than 17 million Kenyans.

The directive affects the value of Ethio telecom, since in other countries mobile banking accounts for more than 40pc of the revenue generated, according to Tewdors Tassew, a fintech consultant with close to a decade of experience.

The new directive, which has been in the making for the last year, requires the non-financial institutions to have a minimum paid-up capital of 50 million Br with a minimum of 10 shareholders to be eligible for acquiring the license.

In addition, the directive has outlined that, except for the government, no tech company is allowed to have a stake of more than 20pc.

This means that government-owned institutions like Ethio telecom and Ethiopian Postal Service are allowed to have more than 20pc shares, according to Tewdros.

“This requirement is at the high end, and it doesn’t seem to welcome smaller tech companies,” said Dawit Haile, business director for Allentech S.C., which is based in Meqelle. “Small tech companies have a better leg-up due to their actual tech-stack background to address the gap that has left millions unbanked.”

“The requirement for the CEO is also quite unreasonable, the government needs to understand what a tech company means,” he added, referring to the high educational qualification and level of experience that is set by the directive for the management of the companies.

The directive has also defined the levels of the accounts and the threshold of the daily transaction in line with the account level. An account subscriber for level one can be referred by an existing user and will have a maximum account balance of 5,000 Br with a daily transaction limit of 1,000 Br and a total transaction limit of 10,000 Br.

“With the previous system, one had to physically visit a branch or an agent to get an account," said Tewdros. "Now anyone can get an account from home."