Safaricom Ethiopia has secured a mobile money license from the National Bank of Ethiopia, 7 months after its launch, intensifying the competition in Ethiopia’s mobile money market.
The move allows Safaricom to introduce its widely successful mobile money product, M-Pesa, in Ethiopia, putting pressure on Telebirr, the government-backed mobile money service that had feared this competition.
After a comprehensive pilot program spanning ten cities and a phased launch across the country, Safaricom officially launched its Ethiopian service in early October 2022. During the launch ceremony, Ahmed Shide, Ethiopia’s Minister of Finance, revealed that Safaricom had been granted permission to roll out M-Pesa in Ethiopia. Despite President Ruto’s optimistic assurance and a finalized agreement with Ethiopia’s Prime Minister Abiy Ahmed, it took more than eight months for Safaricom’s mobile money license request to be formally granted by the government.
The National Bank of Ethiopia, the country’s central bank, highlighted that the issuance of the mobile money license aligns with its ongoing objective of promoting innovation and financial inclusion in the Ethiopian market.
Prior to this license, Ethiopia’s bureaucracy had been slow in awarding mobile money licenses, mainly to protect Ethio-Telecom, which is majority-owned by the government and had recently launched its mobile money service, Telebirr. However, in April 2022, the central bank announced a draft bill allowing foreign-owned telecom operators, including Safaricom, to offer mobile money services once it becomes law.
In December 2020, the Ethiopian government opened a bidding process for two licenses to challenge Ethio-Telecom’s market monopoly. Ethio-Telecom, with 54 million subscribers, held a dominant position in Ethiopia, the second most populous country in Africa with an estimated population of 118 million. Two consortia participated in the bidding: one led by South Africa’s MTN Group in collaboration with China’s Silk Road Fund, and the other by the Global Partnership for Ethiopia Consortium, spearheaded by Safaricom and featuring Vodafone, Vodacom, CDC Group (now British International Investments), and Sumimoto from Japan. After the government rejected MTN Group’s bid, Safaricom’s consortium emerged as the winner, causing MTN Group to decline participation in a subsequent tender.
With Safaricom’s entry, Ethio-Telecom’s Telebirr service faces competition from Safaricom’s near-monopoly M-Pesa. Notably, the Ethiopian government intends to sell 45% of Ethio-Telecom, marking a significant shift in the country’s telecommunications sector.
The granting of Safaricom’s mobile money license signifies a crucial step in Ethiopia’s journey towards opening up its market. By allowing foreign-owned telecom operators to offer mobile money services, Ethiopia aims to foster innovation and enhance financial inclusion in the country. As Safaricom prepares to replicate its Kenyan success in Ethiopia, the mobile money landscape is poised for a dynamic transformation that will benefit consumers and drive further economic growth.
