Safaricom Telecommunications Ethiopia, a subsidiary of Kenya’s Safaricom Plc, recently received a mobile money license in Ethiopia, marking the first time a foreign investor has been granted such a license in the country. This is a significant achievement for both Safaricom and the fintech industry, as M-PESA, the world’s largest mobile payment system, can now expand its services to Ethiopia’s population of over 112 million people.
The license approval will help to fuel financial inclusion and innovation in Ethiopia, as it currently has a financial inclusion rate of only 35%. M-PESA has already catalysed financial inclusion in Kenya, increasing it from 26.7% in 2006 to 84% in 2021. M-PESA generated over KES 117.2 billion ($886 million) in revenue in FY23, highlighting its success and potential to replicate this in Ethiopia.
Kenya has emerged as a leader in financial inclusion in sub-Saharan Africa, with M-PESA acting as a platform for financial institutions to manage micro-accounts, build customer deposits, and broaden their customer network. As a result, innovative ideas have continued to sprout around M-PESA, which has become like a train engine with more and more wagons of innovation getting hitched on as it chugs along.
In Ethiopia, the government’s implementation of economic reforms designed to liberalize the economy and promote private sector growth provides a solid foundation for Safaricom’s entry into the Ethiopian telecom market. The company has committed to investing over $8 billion in the country over the next decade, with a significant portion of this investment going towards building out its telecommunications infrastructure, which will help deepen Ethiopia’s internet penetration.
With the support of the National Bank of Ethiopia, M-PESA’s services will expand to millions of Ethiopians who currently lack access to traditional banking services. This license approval is part of the NBE’s objective of fostering financial innovation and inclusion in the Ethiopian market, and the menu of digital finance offerings, including mobile banking, mobile wallets, internet banking, and card banking, has expanded rapidly in recent years, showing strong underlying public demand for the use of such services.
The license approval will have a positive impact on Ethiopia’s economy, as it will spur economic activity in the country by improving access to financial services for millions of Ethiopians. M-PESA’s success in Kenya highlights the potential for this license to fuel financial inclusion and innovation in Ethiopia, which will ultimately benefit the country’s population and economy.