EXCLUSIVE: Opportunity within Ethiopia’s nascent Fintech and mobile payments industries
With its population of 115 million, Ethiopia offers investors in Fintech and telecommunications a clear opportunity to scale. These markets are described as nascent, relative to market size, and continue to attract local and international players.
One example is Nigerian mobile payments and financial services company Paga, founded in 2009.
In March this year, Paga announced regulatory go ahead from the National Bank of Ethiopia for it to launch its online payment gateway in the country.
The company also recently established a partnership with the Bank of Abyssinia, widely regarded as one of the largest banks in the country.
Paga’s timing couldn’t be better because Ethiopia continues to open its telecommunications industry to private players following the licensing of Safaricom to build a mobile network, which will include mobile financial services under M-Pesa, as well as Fintech payments.
CEO of Paga Ethiopia Adam Abate said: “We think of our business as two ecosystems; first is consumer ecosystem where we provide direct consumer financial payment services and digital financial products. Second is sales ecosystem where we work with sellers such as enterprises and individuals. Underlying that, we also expose our infrastructure to third parties to leverage and build their own innovations.”
“We work with banks as much as we work with mobile money companies. We work with many large banks in Nigeria, and in Ethiopia we work with the largest bank. We believe that we complement banks’ offerings and strengthen each other through our partnerships.”
Paga’s objective is to “make it easy for people to pay or get paid” regardless of where their funds are and this involves mobile money platforms.
Mobile money transaction value
The value of mobile money transactions across Africa has increased by 39% to US$701.4-billion in 2021, dominated by M-Pesa, which is nearing the US$1-billion mark in revenue from mobile money.
MTN and Vodacom are front-runners, alongside Zimbabwe’s Econet Wireless, in mobile money in Africa, although mobile money taxes in markets such as Tanzania and Zimbabwe remain challenges.
Ethiopia is a late comer to the mobile money scene. The country’s first telco-run mobile money platform, Telebirr, was launched in 2021. The platform notched up one million registered users in the first week of launch, reflecting strong market demand.
The country could soon list M-Pesa as its second telco-run offering with Safaricom expected to launch its network and mobile financial services this year.
“The Fintech industry in Ethiopia is nascent. Given the size of the country, it’s still very small but in the past two years it’s been gaining a lot of momentum. It’s poised to catch up with the rest of the continent and neighbours in the region,” Abate explained.
He believes there has been improvement by government in terms of regulatory aspects in the past two years or so, especially around the opening of the payments industry to non-bank players such as Fintechs and mobile telecommunications companies. Payment system operators are now allowed.
“The conditions are set now for it to take off. Ethiopia has sold its first private telecom licence to a consortium led by Safaricom. It’s a big deal,” Abate added.
According to the World Bank, remittance inflows into Sub-Saharan Africa “returned to growth in 2021, increasing by 6.2% to US$45-billion” in a difficult year dominated by the Coronavirus pandemic.
Abate said “remittances are an area of significant interest but at this point I wouldn’t say it’s a huge part” of its business. But we are integrated with many international remittance companies whereby you can remit direct into a Paga wallet.”
In Nigeria, Paga has more than 100 000 agent points - locations where its agents can service clients - although Abate would not disclose user numbers and agent numbers for Ethiopia.
Abate added: “For Ethiopia, opportunity is huge and I can’t stress it enough. Up to a year ago, everybody had to queue up to pay for electricity or water. It was very under developed. There is huge demand for convenience and from a digital economy space as payments at the core of any digital transaction.”
Abate spent many years in the United States, trying his hand with many start-up ventures. He started his career in Addis Ababa though, with a consultancy company then known as Andersen Consulting.
He then left Ethiopia “to be involved in a number of start-ups” along the East Coast of the United States.
“Then I moved back to Africa to pursue entrepreneurship which I did for about 22 years ago. The initial concept was an alternative energy company but in parallel I was also working at the ministry of finance leading the tech for financial reform program,” he told ITWeb Africa.
At the end of this engagement, he started Apposit with other partners “who still work with us” at Paga. Apposit had been in operation for 12 years before it was acquired by Paga.
“When I returned back to Africa, I was vocal convincing people to come back but today I can tell you that it’s tough, it’s not easy. I would agree that everybody would, in an ideal world, would love to be involved in Africa but there is also a lot of risk and noise. We have lots of talent out there …hopefully African governments can do a great job to bring back these people back home.”