June 20, 2024

Advancing Digital Growth

Pioneering Technological Innovation

Ethiopia’s journey towards digital payments and inclusive financial services

3 min read

In 2021, Ethiopia embarked on an audacious journey with the launch of its National Digital Payments Strategy (NDPS). This initiative was more than a policy reform; it was a bold stride towards reshaping the country’s economic landscape into one that is more inclusive, efficient, and prosperous. As we edge closer to the culmination of the first phase of the strategy’s implementation in 2024, it is crucial to take stock of the ground we’ve covered, the hurdles we’ve overcome, and the significant strides we’ve made towards a digital-first financial ecosystem.

Spearheaded by the National Bank of Ethiopia (NBE), with the support of the United Nations-based Better Than Cash Alliance, the strategy is steering the nation towards a less cash-dependent economy. From the get-go, Ethiopia’s payment landscape, vast and intricate, presented numerous challenges in the transition to a more digital ecosystem. These challenges included infrastructure deficits, digital literacy gaps, regulatory hurdles, and a growing financial inclusion gender gap. However, the determination to drive greater efficiency in payment service delivery, transparency, women’s economic participation and sustained inclusive growth by leveraging responsible digital payments is paving the way for a financial revolution.

In recent years, Ethiopia has made significant progress in both the banking and telecom sectors. In 2021, Ethiotelecom launched Telebirr, its mobile money platform, which was licensed and saw an impressive uptake of over 42 million users within two years of its service. Additionally, for the first time in its history, the National Bank of Ethiopia (NBE) began issuing licenses to non-bank Payment Instrument Issuers and Payment System Operators, thanks to an evolving regulatory approach. Nowadays, there are over 11 non-bank payment service providers operating in the Ethiopian financial sector, including Ethiotelecom (Telebirr), Safaricom PLC (M-Pesa), Ethswitch (the national switch), Premier Switch Solution, Kacha Digital Financial Services, Arif Pay Financial Technologies, and Chapa Financial Technologies. This marks a pivotal moment for indigenous fintech in Ethiopia.

The period also witnessed a surge in mobile money account openings, starting with just over 15 million in 2021 to over 90 million by December 2023.  Additionally, there has been exceptional growth in the volume of digital payments as a percentage of total transactions from 27.2% in 2022 to 130% in 2023.

Furthermore, the recent approval of a national payment system proclamation no. 1282/2023 by the Ethiopian Parliament has opened doors for foreign investment in the financial sector, signalling a shift towards a more inclusive economy. Foreign-owned Safaricom’s M-Pesa got its license in 2023, marking another impressive reform milestone towards inclusion.

The NDPS framework, built on four strategic pillars, has been instrumental in laying the foundation for Ethiopia’s digital financial infrastructure. Complemented by four key enablers, these pillars ensure the efficiency, reliability, and safety of the national payment system, facilitating widespread adoption and fostering innovation.

While the surge in digital transactions is encouraging there is still a need to prioritise initiatives that drive the digital and financial inclusion of women and other vulnerable groups. Financial and payment service providers should mainstream gender considerations into their product and service design approaches to continue building trust and reliance on Ethiopia’s modern financial framework, paving the way for a more accessible and inclusive financial landscape.

Looking ahead, the next phase of the NDPS is set to deepen digital financial services’ reach into rural and underserved areas. We aim to do this by leveraging critical economic sectors such as agriculture and healthcare, broadening the spectrum of financial products available and bolstering data protection and cybersecurity measures to safeguard users.

The upcoming annual payments conference in Addis Ababa in April will be a pivotal moment to chart the future course of Ethiopia’s digital financial landscape, bringing together a diverse group of stakeholders to share insights, forge partnerships, and set actionable goals for continued progress.

Ethiopia’s digital payment initiative is part of a larger reform agenda, leveraging global insights on digitisation to foster stronger, safer, and fairer communities.

As we approach the completion of the first foundational leg of our journey, our voyage can perhaps offer insights to nations across the continent aiming to transition towards a cash-lite and financially inclusive economy. The NDPS exemplifies the power of innovation, collaboration, and perseverance in crafting an economic future that benefits all citizens.


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