The National Bank of Ethiopia (NBE) takes prudent steps to revise its directive to best realize the targets set by the National Digital Payment Strategy (NDPS), by boosting the role of agents whilst splitting certain weights to banks and other financial institutions.
During the recently launched ceremony for the GSMA report, titled, ‘Mobile Money in Ethiopia: Advancing financial inclusion and driving growth’, Solomon Damtew, Acting Director for the Payment and Settlement Systems Directorate at NBE, pointed out that digital payment schemes are registering tremendous growth despite being relatively new in the country.
As Solomon highlighted, in order to register the required growth, the central bank has harbored a conducive environment by backing the sector on issuing relevant laws and directives, “The directives in the digital payment and agent services has created an enabling environment for the system to flourish.”
However, the Acting Director cited that some changes are expected on the directive to boost the role of agents on the digital payment goals.
He told Capital that regarding boosting the role of agents, there will be clarifications on the directive and some changes will follow suit to realize NDPS’ success.
According to the latest report of GSMA in Ethiopia, the number of agents has been growing steadily, albeit slightly lower than its peers.
Regarding agents, Solomon said that the system needs to have some contact point where it can be able to change someone’s physical cash to electronic money especially for the very remote areas, “So these agents are very critical. This is still the area that we are yet to touch upon. So in terms of the agent businesses, most of the agencies are located in towns.”
He signaled that as a country, we need to expand to the rural areas in order to onboard the financial excluded society, “Therefore, we have to be considerate of these issues.”
“So what we did when we drafted this regulation, we saw who should be the agent? So in the previous directive, a valid business ID for example was a requirement for being an agent, which is very restrictive. This is because when we go to remote areas those kiosks and small shops seldom have any valid business license, which is a trend we have as a country,” the Acting Director explained.
“As per the use of the agent directive, we also encouraged an individual to be an agent especially in the remote area like through using the elders who are most respected, to attract new agents,” he added.
The other thing that NBE has considered was with regards to agent exclusivity. In the previous directive, which was issued in 2012, an agent was exclusive for specific financial institutions that have now changed to multiple mobile money services, which allow a single user to use that agent regardless of the issuer.
At the panel discussion which accompanied the report launch, the Use of Agents Directive, issued April 1, 2020, cited it allowed broader access to agent network management as the key enabler to expand agent services.
As Solomon indicated, the directive was a kind of comprehensive developed to serve both agents for regular bank services and mobile money services, “We are planning to split it.”
“The current Use of Agent Directive is more of an enabler for further financial services. And of course, we need to make more awareness to provide more clarification on the intention of the directive.” he said.
The Acting Director also expressed that the regularity body is considering revising its steps, “From the feedback that we got from the assessment of the regulation as per the implementation of the national digital payment strategy; we are considering to do some improvements.”
The leader of the sector at the regulatory body elaborated that for mobile money services agent, it is very crucial to convert cash to electronic means, mainly in very remote areas.
Most of the agents are located in big towns that require expanding to rural area in order to onboard the financially excluded society.
According to the plan, Solomon said, “We identified six major points in which we need to intervene and revise. The first is splitting from the other so that’s very important. The other five are in terms of KYC while some are there that created complications. So we have to clarify the existing directive.”
Bruk Adhana, Head of telebirr at ethio telecom, explained that agent networks are one of the key pillars for the successful implementation of mobile money, “And as it was, the first basic point is having an enabling directives and associated guidelines from the central bank in order for there to clarity.”
However he expected more amendments in the directive particularly written one besides the existed supportive understanding and green light from the regulatory body and leaders at the central bank.
In the past two years, telebirr has achieved to recruit around 111,000 agents.
Bruk said that the very important point is the active rate of the agents that is usually the key KPI to measure 30 days, 60 days, 90 days active rate.
“So, for the past two years we have engaged most of our airtime distributors to be our master agents and we have tried to engage different modalities to expand the agent network. We have currently around 20 percent weekly active rate agents from the total one,” Bruk said.
It is around 25,000 or 21 percent for 30 days active rate and 23 percent active rate in 60 days, “It is growing but we need to add more and also support our agents to have different engagement. And hopefully we will also have a very enabling directive very soon from NBE.”
He added that one of the key learning points that the operator has from NBE is that things have become very easy as environment is enabling.
The NDPS which was designed to be achieved until next year indicated on its document that the in the new ecosystem, agent networks are key to improving the distribution reach of financial services. The Use of Agents Directive addresses prior restrictions on the use of agents, such as allowing agent non exclusivity and agent network management by a non-bank financial service provider, and providing for a tiered structure of agents (super agents and micro agents).
The National Strategy also mentions that regarding the success of the agents that the NBE will continuously assess the impact of the directive, troubleshoot challenges in collaboration with sector stakeholders, and adapt regulations to grow the available agent networks and serve the needs of customers.
According to GSMA report,financial services access points at brick-and mortar outlets and mobile money agents are both crucial to advancing financial inclusion in the last mile.
The GSMA report, which Solomon and Bruk expressed their reservation particularly on the data, claimed there are significant changes than what the figures mention on the report. As indicated, according to the NBE data, 71 is the number of access points in Ethiopia which have now grown by almost 200 percent between September 2021 and September 2022. With mobile banking and mobile money services expanding, the NBE estimates that as of September 2022, there were more than 185,000 agents in the country.
It added that while agent networks are growing in Ethiopia, reportedly KYC requirements can be challenging to meet and that on-boarding processes can be slow.
The number of agent network share for the public is still very low that needs more expansion.
It a universal recommended that in order to fast-track the KYC processes, more agents need to be registered.