Ethiopia has told foreign mobile money companies there will be no room for them to operate in the country, opting instead to promote local operators. This puts Kenyan telco, Safaricom’s plans in jeopardy considering it had hoped to introduce its popular M-Pesa mobile money transfer platform in the market of 100 million people.

Safaricom had been in negotiations with the government to launch the mobile money service in Ethiopia. But the country’s apex bank this week said it would only allow locally-owned non-financial institutions to offer such services as it seeks to boost non-cash payments. This means that only companies like Ethio Telecom, a government-owned monopoly, have the right to move into mobile money services.

This means foreign companies are locked out of the sector and for Safaricom to offer the service in Ethiopia, it will need to go into partnership with Ethio Telecom, which is in line to be privatized with the sale of a minority stake. 

The Kenyan firm, in a partnership with its parent body Vodacom, and a number of other global telecom firms such as MTN, Orange, Etisalat, and Airtel, have all expressed interest in gaining access to Ethiopia’s fast-growing mobile phone services market.

M-Pesa has the potential to transform Ethiopia’s economy, as it has done in Kenya, allowing people to avoid other inefficient banking systems in the country by carrying out transactions through a phone. The ability to access digital banking services is likely to be a game-changer for Ethiopians whose banking sector has no electronic way of transferring funds from one bank to another.

But as it stands, Safaricom will remain unable to offer financial services in the customer rich market. “This directive effectively excludes foreign fintech and telecom companies from reaping the business benefits,” Bahakal Abate, a corporate lawyer in Addis Ababa, told Reuters.

Ethiopia’s government last year announced plans to open up its telecoms and aviation sector, the state logistics firm and electricity monopoly to private investment. Telecommunications monopoly, Ethio Telecom, is seen as the biggest prize due to its huge protected market with a subscriber base of 44 million – the biggest single-country customer base of any operator in Africa.

While the government has been able to attract notable international investors under its privatization plan, the latest move to shut foreign players out of its mobile money space could send mixed signals to investors over the country’s openness to foreign involvement in its key sectors.

By Ahmed Iyanda.

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