M-pesa entry into Ethiopia: Start of mobile money war

It is giving Ethio Telecom’s fintech solution Telebirr a run for its money

In Summary

• Safaricom has signed up 2.7 million customers, while Telebirr has 34.3 million

A customer uses M-pesa
A customer uses M-pesa

As Safaricom launches M-pesa in Ethiopia with plans to mirror its huge success in Kenya, a battle with an incumbent looms large.

Safaricom's activation of M-pesa in Ethiopia will initiate battle for a potentially huge mobile money market. But for once, the regional giant won't have it all its own way. Ethio Telecom’s fintech solution, Telebirr is already a step ahead.

Over 2.7 million Safaricom customers who have signed up since the East African giant started operations in Ethiopia in 2021 are eligible for the mobile money service, according to the telco's top official.

“M-pesa is known to be a game changer for financial inclusion,” said Safaricom Ethiopia Interim CEO Stanley Njoroge on August 18, in an announcement that the service was live.

“We will continue to broaden the services our customers receive from the M-pesa platform.”

Ethiopia offers a substantial market, with its population of 120 million, compared with Kenya's population of 53 million.

In Kenya, M-pesa transactions rose to Sh21.03 billion ($147 million) in the financial year ending March 2023, a significant increase from the Sh15.75 billion ($110 million) registered the year before.

The service, which launched in Kenya in 2007, has seen transactions worth some Sh35.86 trillion (US$248 billion) almost three times Kenya's current Gross Domestic Product processed since inception.

The mobile money service crossed the 30 million active monthly users mark in Kenya in March 2022, driven largely by innovative micro-credit facilities that offer loans without collateral.

This month, Kenya’s Central Bank approved an increase of the daily M-pesa transaction limit from Sh300,000 (US$2,079) to Sh500,000 (US$ 3,465), highlighting the service's growing popularity among small businesses.

According to Safaricom, M-pesa has enabled massive growth in financial inclusion in Kenya, with over 90 per cent of the adult population now having access to mobile banking.

“We look forward to replicating this success in Ethiopia,” said Interim Safaricom M-pesa Mobile Financial Services general manager Paul Kavavu.

In May, Safaricom became the first foreign-owned entity to get a mobile money service licence from the country’s banking regulator, National Bank of Ethiopia.

The licensing and activation now puts M-pesa in direct competition with Telebirr, which started operations the same year that Safaricom launched in the country.

In its 2022-23 annual business performance review, Ethio Telecom reported that Telebirr has racked up 34.3 million subscribers, with a transaction value of ETB 679.2 billion ($12.3 billion) over the last two years without competition.

It has mainly targeted governmental and non-governmental institutions, the fuel industry and banks.

“Integration with banks is completed, enabling money transfer from bank to Telebirr in 23 banks and from Telebirr to bank in 21 banks,” Ethio Telecom reported.

Telebirr’s latest partnership is with the Commercial Bank of Ethiopia, opening the service up to the bank's over ETB 1 trillion ($ 18.2 billion) in deposit volumes.

“The bank will provide loans in cooperation with Ethio Telecom to increase financial inclusion, and will continue to further strengthen such activities and initiatives to achieve the overall development of Ethiopia,” according to a joint statement by Ethio Telecom and the bank.

M-pesa has more than 51 million banked and unbanked customers in Kenya, Tanzania, South Africa, Lesotho, DRC, Ghana, Mozambique, Egypt and now Ethiopia.

GSMA’s State of the Industry Report on Mobile Money 2023 shows Africa's mobile money transactions grew by 21 per cent, or $44.9 billion, to be worth $836.5 billion in 2022.

East Africa had the highest mobile money transaction value, worth $491 billion, after a 23 per cent growth driven by 115 million active accounts.

The continent accounted for nearly two-thirds of $1.26 trillion transacted globally.

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