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Ethiopia Maps Out Digital Payment Strategy


May 31 , 2020
By GELILA SAMUEL ( FORTUNE STAFF WRITER )


The board of the National Bank of Ethiopia (NBE) is set to approve the National Payment Strategy, a three-year game plan that lays out infrastructure to enable users to make financial transactions using the accounts and payment instruments issued by financial institutions.

The strategy, which has been in the making for the last four months, is part of the ongoing reform of the financial sector and the development of the country's digital payment system. The document outlines four pillars: infrastructure, adoption, regulation and innovation. These pillars are crafted to be implemented in three years as the way forward for tapping into digital retail payment solutions.

With just 45.4pc telecom penetration, Ethio telecom, the state telecom operator, is at the top of the strategy's to-do list.

“We're counting on the privatisation and also the unwavering effort of Ethio telecom to cement 100pc penetration in the country and provide cheaper service,” said a source close to the case.

Ethio telecom, which is counting down the months to privatisation, reached 45.6 million telecom service users as of the first half of this fiscal year. From its total customer base, one million of them use fixed telephone lines, while 22.7 million and 44 million use data and mobile calling services, respectively.


The infrastructure for interoperability, a system that enables financial and non-financial institutions to work with or use the parts or equipment of another system, has only been fully realised with ATMs. Point of Sale (PoS) interoperability and mobile account-to-account transfer have yet to be adopted.

Eth-Switch S.C., an entity owned by a consortium of all banks including the National Bank of Ethiopia (NBE) that was established in the capital seven years ago, is currently working on PoS and mobile account-to-account interoperability.

Eth-Switch has finished the pilot of PoS interoperability, which was rolled out in Shoa Supermarket, Fresh Corner, Yod Abyssina and Unity Park, according to Yilbes Addis, CEO of Eth-Switch S.C.

"We've submitted documentation to the central bank to get its blessing to roll out nationwide," he said, "whereas for the mobile channel of interoperability, we're preparing documents to submit to the NBE to commence piloting."


Meanwhile, the central bank is wrapping up its part of passing the bill for the Payment System Operators directive that outlines the legal framework for the interoperability of systems.




From the total services provided by government offices, 175 of them are in the pipeline to be under e-gov. So far, 70 services have been adopted by 10 public offices excluding digital payment transaction options in their systems.

The strategy aims to adopt the value of digital transactions not only for e-gov but also for tourism payments and cross-border remittances. In the last few months, laws relevant to e-transactions and payment instrument issuers were legislated as the first steps toward governing digital transactions.

“So far, many tech entrepreneurs were operating by finding holes in the closed system," said a source close to the case. “Now the government is working to create the necessary legal framework to enable the systems."

The Ministry of Revenues is currently drafting the e-receipt and e-signature directives as part of the financial reform. In addition, the recently issued directive that limits cash withdrawals from banks was also one of the long-term action plans of the strategy under the pillar of regulation.

Supporting new innovations and ideas is the last step of the master plan, which will be accomplished by working with existing fintech companies in the country.


Earlier this year, the central bank officials had called upon the first workshop comprised of existing fintech companies, bankers, microfinance institutions, the Ministry of Finance, the Ministry of Innovation & Technology, and the Ethiopian Cash Working Group to underscore the current challenges to digitising retail payments.

Ethiopian Cash Working Group, which was re-established in 2016, is a forum of stakeholders of over 20 United Nations agencies, donors, nonprofits and government representatives that are implementing cash-based interventions for humanitarian efforts in the country.

The workshop, which collaborated with the Better than Cash Alliance, listed many challenges to Ethiopia's progress toward adopting fintech, including the inconsistency of the internet, the requirement that government accounts be capped to the Commercial Bank of Ethiopia, and restrictions caused by certain legal frameworks. The Better than Cash Alliance, based in the United Nations, is a global partnership of over 75 governments, international organisations, and companies that advocate for the transition from cash to digital payments to advance the Sustainable Development Goals. The Central Bank has been a member of the Better Than Cash Alliance for the last three years.

After three more workshops, the governing bank went on to hire Boston Consulting Group, which is a global consulting firm that advises on value creation strategies and innovations, to craft a three-year master plan. The company submitted the plan to the central bank earlier this month.

Although a strategy is a good first step taken by the government, the real work rests upon the existence of systems, infrastructure and regulations, according to Noad Solomon, an independent fintech consultant with a decade of experience.

“The factors of people settlement, establishing use-cases, awareness creation and the readiness of institutions should also be addressed,” Noad suggested.



PUBLISHED ON May 31,2020 [ VOL 21 , NO 1049]






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