Nov 27 , 2021

The rank of microfinance institutions (MFI) joining a national payment system is swelling following three MFIs showing strong interest in acquiring shares with EthSwitch S.C.

The three MFIs joining EthSwitch as shareholders serve close to 1.5 million customers; EthSwitch allows their clients to complete transactions with member banks. EthSwitch was incorporated in 2011 with an equity of 12 million Br raised from all the banks. Recently established banks – ZamZam, Hijra and Goh – have also become shareholders.

Rays Microfinance, Addis Credit & Saving Institution, and Oromia Credit & Savings have finalised the requirements to join EthSwitch, such as having a settlement account with the National Bank of Ethiopia (NBE) or partnering with a bank that does. However, buying shares remains optional.

Somali Microfinance was the first MFI to get accepted by EthSwitch in May this year after acquiring 1,035 shares at a par value of 1,000 Br. Not all financial institutions have joined EthSwitch, a reason for the directors of EthSwitch to decide how to accept new members moving forward, says Fikru Woldetensie, director of marketing and innovation of EthSwitch.

Last September, the three MFIs began the process, reaching the integration phase recently, where their core systems are linked with EthSwitch.

These are part of the 41 MFIs operating in the country with 52.4 billion Br in aggregate deposits, a 17.2pc increase from the previous year. Eleven of these are public-owned, including Addis Credit and Oromia Credit & Savings.

The microfinance institutions will also benefit from the interbank transfer system EthSwitch launched last month. They can issue debit cards to their customers using the operator's system, which it avails to any member without a switch system of its own. Six commercial banks have a switch system, while six others use a shared platform operated by Premier Switch Solutions, a company incorporated by banks including Awash, Hibret, and Nib.

There were close to 5,000 ATMs, 10,000 PoS terminals and 15 million card users in Ethiopia as of June 2020, a report from EthSwitch reveals.

MFIs have the advantage of using an extensive network of ATM and point of sale (POS) machines that they do not have to invest in, say experts in the industry. Kinfemicheal Yibkaw, a digital financial services expert, is one of these experts who believe EthSwitch's infrastructure offers the clients of these MFIs a range of additional transactions.

"The most important benefit we get from joining EthSwitch is for our customers to withdraw money from any ATM easily," said Damtew Alemayehu, CEO of Addis Credit, established in 2001.

Addis Credit & Saving, serving 250,000 customers, has met all the requirements to join EthSwitch, Damtew told Fortune.

Addis Credit is growing to a commercial bank with a paid-up capital of nearly four billion Birr, rebranding itself as the 'Bank of Addis'. Oromia Credit, serving 700,000 customers, is also preparing to join the industry as 'Siinqee Bank' with a paid-up capital of seven billion Birr.

Rays Microfinance has progressed farthest in its bid to integrate with EthSwitch. Established in June 2014 by six investors with a paid-up capital of 10 million Br, Rays is also expanding on its success in the digital finance space through its mobile money service, Sahay. It is a platform launched in February last year, enabling customers to deposit, transfer and withdraw cash. Sahay has onboarded close to 12,000 merchants and 2,400 agents during its first year of service. The majority of its 600,000 users reside in the eastern parts of the country.

PUBLISHED ON Nov 27,2021 [ VOL 22 , NO 1126]

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