Central Bank Imposes New Limits on Fintech Firms

Foreign nationals of Ethiopian origin are allowed to invest only in foreign currency should they get into the business of payments system operators or instrument issuers. The new rule comes into force just a year after the central bank partially liberalised the digital payment market.

The directive issued by the National Bank of Ethiopia (NBE) has been effective beginning July 1, 2021.

The central bank is yet to issue licenses to private fintech companies though it has received a dozen of applications from hopefuls such as ArifPay, ChapaPay, SantimPay and UniCash. The state-owned Ethio telecom has been awarded a license for its Telebirr mobile money service.

Commercial banks, where the forex escrow account of a newly licensed payments instrument issuer or system operator would be opened, are required to surrender 30pc of the forex invested by Ethiopian-born foreign nationals, according to the directive. The escrow accounts are to remain closed until the fintech company receives a full operational license, while initially subscribed shares must be paid in foreign currencies. The remaining 70pc is to be relinquished to the commercial bank where the blocked account was opened. Dividends for shareholders of foreign nationals are to be made only in Birr, says the directive.

The companies are responsible for making sure all shareholders are compliant with the directive and submitting a compiled document to the central bank.

A payment instrument issuer is required to register a paid-up capital of 50 million Br to engage in services such as mobile banking, microcredit, inward international remittance facilitation, and local money transfers. A system operator is to have between three million Birr and 300 million Br in paid-up capital, depending on the scope of services the firm provides. It can give services from payment processing to personalisation of payment cards, and from payment aggregation to solutions services.

The directive issued a few weeks ago has brought displeasure to industry insiders. A significant number of ArifPay's shareholders are foreign nationals of Ethiopian origin.

Habtamu Tadesse, its founder, says foreign nationals residing in Ethiopia for years have no means of earning foreign currency to buy shares in forex. Also a founder of a taxi-hailing company, Zay Ride, he finds the directive shortsighted and unable to consider the bigger picture on how these payment services would bring foreign currency income.