By Muluken Yewondwossen

The financial regulator, National Bank of Ethiopia (NBE), expresses hope for change following the tweaks being made to the value added tax (VAT) proclamation amendment which is set to remedy the challenges that face the mobile money service.

The regulatory body and service providers, particularly Ethio Telecom’s Telebirr, have been for quite a while raising concerns regarding the tax issue that were imposed on the mobile money partners.

As Capital learnt through those close to the issue, leaders at Telebirr and Ministry of Revenue (MoR) have held discussions to ease the challenge, but the much needed change is yet to materialize.

Whilst addressing the matter, Bruk Adhana, Head of Telebirr, a few weeks ago told Capital that he had a meeting with officials at MoR, however he was reluctant to reveal the outcome.

As Capital gathered, the mobile money service providers have shared the case with the financial industry regulatory body for a feasible way forward.

Solomon Damtew, Acting Director for the Payment and Settlement Systems Directorate at NBE, recalled that the issue is associated with financial inclusion and National Digital Payment Strategy (NDPS) that the government highly demanded to expand for the reach to the financial excluded society.

As Solomon explains, currently, the mobile money service agents are supposed to pay tax from their commissions that they earn from mobile money service providers.

“The primary concept of expanding mobile money service is addressing the public in remote areas, while agents that are mostly kiosks and small shops at the periphery and rural areas do not have business license or tax registration, thus do not have receipts. So when mobile service providers pay commissions to agents they are not issued receipts, which is one of the challenges that service providers face,” Solomon elaborated on the issue.

He further cited that agents are also expected to pay tax from their commission payment, “One of our duties is insuring the expansion of financial service and financial inclusion and the attainment of the enlargement of agent service. To meet the target we believe that the mobile money agent service shall be exempted from tax levy.”

He told Capital that he hoped that the relevant tax body would be interested to ease the situation, while he reminded that there were also interests to expand the government’s revenue stream, “The case shall be seen in a balanced manner under the financial inclusion and revenue expansion.”

As he highlighted, his office is closely following the case “We expected the issue to be solved on the new VAT proclamation that is expected to be amended in this budget year.”

Agent networks are one of the key pillars for the successful implementation of mobile money particularly addressing the society in very remote areas.

Telebirr, the biggest mobile money service provider which launched its business about two and half years ago has enabled to recruit over 110,000 agents.

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.

At the end of the budget year, Ethio Telecom’s Telebirr had 34.3 million subscribers with a total transaction value of 679.2 billion birr.

Much like Ethio Telecom, Safaricom Ethiopia has also launched its well know mobile money service, M-Pesa in August.

On GSMA’s mobile money report launching event and panel discussion held late July, Solomon said that NBE had taken prudent steps to revise its directive to best realize the targets set by NDPS, by boosting the role of agents whilst splitting certain weights to banks and other financial institutions.

He pointed out that digital payment schemes are registering tremendous growth despite being relatively new in the country.

The Use of Agents Directive, issued April 1, 2020, cited that it allowed broader access to agent network management as the key enabler to expand agent services.

As Solomon indicated, the directive was a comprehensive development 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.

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.”

He elaborated 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.