Ethiopia wants $150m fee for M-Pesa entry

Safaricom-led consortium is set to pay $150 million (KSh18.9 billion) in license fees to launch M-Pesa in Ethiopia, if the proposed regulations by the country are passed. The amount will be in addition to 50 million birrs (KSh117.81 million) that Safaricom will have to pay in cash as paid-up capital and the amount deposited in a bank account with restricted access. The National Bank of Ethiopia published a draft that contains the proposed rules that will guide the licensing and launching of mobile money operations such as M-Pesa. The draft directive on licensing and authorisation of payment instrument issuers makes it clear that Safaricom will have to pay additional money to get a mobile money license.

The National Bank of Ethiopia is expected to hold a consultative meeting with officials from Safaricom Ethiopia, Ethiopia Telecommunication Authority, and those from banks, micro-finance banks, and payment system operators to discuss the draft. If the proposal is passed in its current form, Safaricom will be required to launch M-Pesa within six months of getting the license. M-Pesa accounted for KSh107.69 billion ($853 million), 39.9 percent, of the telco’s KSh269.86 billion ($2.1 billion) total mobile service revenue for the year ended March 2022.

Ethiopia is home to more than 112 million people, making it the second-largest country in Africa by population, and M-Pesa is expected to thrive given the large population that is unbanked. The M-Pesa license will help Safaricom take mobile money service competition at the doorsteps of state-owned Ethio Telecom, which launched a new mobile financial service called Telebirr in May 2021, attracting millions of users within weeks.

Safaricom CEO Peter Ndegwa said last November the bridge loan was taken in Safaricom Kenya books, but the telco is keen to bring external debt into the books of the Ethiopian unit. Ethiopia’s banking regulator is keen to support mobile money for other uses such as tax collection and salary payment and will be granted limit waivers in such cases. The Ethiopian market had largely been closed to external investors but started relaxing the stance in 2019 through an economic reform agenda, with the support of the International Finance Corporation. The proposal aims to encourage foreign investment and boost the financial sector in Ethiopia, as well as provide banking services to unbanked people in the country.