Mobile money service providers oppose the new draft directive of licensing and authorization of payment instrument that states issuers to have a mandatory bank partnership to international remittance service.
Last week, the National bank of Ethiopia (NBE) held a consultative meeting with mobile money service providers, telebirr, Kacha and Safaricom officials to extensively look into the proclamation.
According to the draft, companies can provide services related to issuance of payment instrument, cash in and cash out, local money transfer such as domestic remittance, load to electronic money or bank account, transfer to electronic money or bank account, domestic payment including purchase from merchants, bill or utility payment and over the counter draft.
The draft stated that based on the national bank approval, the licensed payment instrument issuers should have out sourcing agreement with banks or financial institutions to give digital saving, credit, insurance, international remittance and pension.
“Outsourcing is going to be processed by financial institutions who hire an external entity to perform its own internal task,” said one of the participants during the consultation forum on behalf of one of the mobile money operators, adding, “In the payment instrument, issuers will only allow bank outsourced services by signing an outsourcing agreement, which will only give banks power.”
“There won’t be much room for invention, and it’s also less likely that senders will be able to lower their remittance costs. This would also end initiatives to lower remittances arriving through the black market,” one official said indicating that comments and complaints were included during the stakeholders’ discussion on the draft document, with hopes that the national bank will revise the draft.
Currently, mobile money service providers such as telebirr are providing inward remittance services through its own platform.
According to the current banking proclamations, Digital Financial Service institutions including payments, remittances and insurance accessed and delivered through digital channels with foreign investors cannot be able to fully or partly own businesses that provide these services in Ethiopia. Re-amendment has been started ever since the government planned to open the financial sector to foreign companies. A firm that stands to benefit from this proclamation is Safaricom Ethiopia, with its mobile money platform M-Pesa.
Currently, there are two mobile money service providers, Ethio telecom’s telebirr, and Kacha digital financial technologies which is privately. Safaricom is also expected to launch is M-pesa service in Ethiopia as soon as the proclamation is ratified.
The draft stated that for a foreign national peeking interest to engage in mobile money service should pay 150million dollars in investment protection fee. The draft states that a minimum paid up capital for mobile money issuers to be 50million birr while foreign companies are expected to pay in foreign currency.
Mpesa is now undertaking preparations to enter the Ethiopian market after government officials gave the green light last year.
Prior to this, the Safaricom-led consortium which also includes Vodacom and Vodafone was in May granted a telecom license in Ethiopia following a $850 million bid but at the time was unsure of what it would take to get the M-Pesa license.
The draft directive on licensing and authorization of payment instrument issuers now makes it clear that Safaricom will have to pay additional money to get a mobile money license.
Currently, NBE is proposing an aggregate daily transaction limit of 20,000 birr and 300,000 birr for accounts classified as level one and level two respectively with no clarity being given on how the classification will be made.