A joint venture is inching closer to erect Ethiopia's first ATM card manufacturing plant, presenting an opportunity for commercial banks to save millions in foreign currency spent every year on the procurement of debit cards.

MK Ethiopia, a joint venture between Vietnam-based MK Digital and Neutronet Plc, a local company, has secured an investment license to erect a card manufacturing plant on a 3,000sqm plot of land in Addis Abeba. Slated to begin operations next year, the plant will comprise two manufacturing units dedicated to ATM, SIM and identificantion cards, each projected to consume eight million dollars.

Financial institutions and Ethio telecom are the major buyers of chipped cards in Ethiopia. Banks issue an estimated five million ATM cards annually, spending millions of dollars procuring the cards from foreign suppliers. A single ATM card may cost between one and two dollars on the global market. MK Ethiopia hopes to cut this by nearly half once the manufacturing plant goes operational.

MK Digital was established in Vietnam almost a quarter of a century ago. Over the years, the company has manufactured 60 million cards in its facilities in Vietnam, while Neutronet has been engaged in networking, security, training and consultancy work for the past 22 years.

The joint venture executives are eyeing the Ethiopian market not just for its potential but to use it as a springboard to expand into other East African markets, according to Graham McKay, a cybersecurity infrastructure engineer at MK. Neighbouring Kenya, where there are 44 commercial banks, is home to more than 11 million cardholders. East Africa hosts over a hundred commercial banks but without card manufacturing plants.

The first manufacturing plant in Africa was opened in 2015 in Nigeria.

"We hope to network with the East African market once we establish a foothold in Ethiopia," McKay told Fortune.

The plant will have the capacity to manufacture up to 4.5 million cards in a single shift. This will enable the country to reduce the forex spent to import cards by 45pc from over 7.5 million dollars yearly (equal to 337.5 million Br based on current exchange rates). The raw materials needed for manufacturing cards, such as polyvinyl chloride (PVC) and chips, will be imported as these are not readily available in Ethiopia, according to Tsegay Habtu, managing director at Neutronet.

ATM and SIM card manufacturers are required to meet international requirements.

“We already have all the software and certifications needed," said McKay. "It'll make it easier to establish a business in Ethiopia.”

A changing trend in the global market is the use of contactless cards. Since the onset of the COVID-19 pandemic, an increasing number of users have been inclining towards contactless cards. In a study conducted last year, Visa sampled 2,000 banking customers in nine countries across four continents and found that 60pc of them prefer to use contactless cards whenever possible.

Learning from the global experience, the Bank of Abyssinia has recently begun issuing contactless debit cards, deploying hundreds of compatible ATMs.