Kenya has been at the forefront of Africa’s mobile money revolution ever since Safaricom launched the continent’s first mobile money platform M-Pesa, but Ethiopia has lagged behind its neighbor and other countries in the region.
In fact, it’s only this month that Ethiopian FinTech Kacha Digital Financial Services became the first private company in the East African nation to be awarded a mobile money license by the National Bank of Ethiopia.
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Moreover, while M-Pesa went live in 2007, it wasn’t until last year that Ethiopia got its first nationwide mobile money service in Telebirr, provided by the state-owned telecoms company Ethio Telecom. Less than a week after its launch, more than 1 million people had registered a Telebirr account — an indication of the pent-up demand for a local mobile money service in the country.
Ethiopia’s late arrival on the mobile money scene is a result of the restrictive nature of its telecoms market, which up until recently locked private enterprises out of building and operating mobile networks.
The latest news that Kacha will be offering mobile money services in the country is a significant milestone for the government’s liberalization agenda. As part of the reforms, international telecoms businesses have been allowed to set up shop in Ethiopia, including Safaricom, which last year was granted the first private telecom license in Ethiopia’s history.
As Safaricom’s CEO Peter Ndegwa recently told PYMNTS, the Kenyan firm sees Ethiopia as an opportunistic market where the company plans to offer the M-Pesa service once regulatory approval is received.
Learn more: Safaricom CEO: ‘Innovation Mindset’ Critical to M-Pesa Success
“When that [mobile money] license comes, we believe we can create similar success in Ethiopia that we’ve seen in Kenya and in the region. [By so doing, we will] democratize how financial inclusion is delivered and digitize the country in the context of enabling mobile internet,” Ndegwa said.
Lessons From Kenya
As always with privatization, there is a risk that a country will simply replace a state monopoly with a single privately-owned one — closing the door to the competition that makes the process of opening up markets to private businesses attractive in the first place.
In this case, the Ethiopian government was considering two industry players that were bidding for telecom permits — Safaricom and Africa’s largest telecoms conglomerate, MTN — but in the end, Safaricom emerged the sole winner after offering to pay $250 million more than MTN’s $600 million bid.
Observers of Africa’s telecoms giants will be aware that Safaricom has faced monopoly accusations on its home turf, with the Central Bank of Kenya announcing plans earlier this year to reign in M-Pesa’s dominance in the mobile money market.
As part of the country’s drive to increase competitiveness, Kenya’s mobile money networks have become increasingly integrated since April, with users of competiting services now able to process payments through Safaricom’s M-Pesa.
See also: Kenyan Mobile Service Providers Link With M-Pesa Payments Platform
Commenting on the development, Ndegwa referred to Safaricom as an “enabling ecosystem” that didn’t abuse its size, but rather welcomed partnerships with other players. He added that it’s “also one of the reasons why we are going into Ethiopia, because we believe that we can replicate the success that we have seen in Kenya in other countries.”
Overall, Ethiopia would do well to observe the benefits of cross-platform interoperability as more providers are likely to enter the space in the coming months and years.
And following Kenya’s example would mean that smaller players like Kacha, international giants like Safaricom and the incumbent state-run model would all be able to find a place in the emerging local ecosystem.
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