OnFrontiers Think Tank Insights: Indicators of the Great Potentials of Ethiopia for ePayment and FinTech Development

Africa is rising and fintech is at the frontiers of development on the continent. People have already foreseen the promising future of mobile finance in the continent and how it has facilitated some of the services and solutions. 

An OnFrontiers expert in mobile finance, Mr. Bizuneh Bekele shares his insights on the trend of ePayment and Fintech Development in Ethiopia. Mr.Bizuneh Bekele was the CEO of EthSwitch S.C, Ethiopia. 

Ethiopia has great potentials for ePayment and FinTech development. Below I have summarized some important indicators.

1.     Huge young and adult population:

According to Index Mundi, Ethiopia’s Population in 2018 (est.) is 105,350,020.

The ages 15 to 54, which highly contribute to the potential users of e-Payment, take 49.69% of the Ethiopian population.

2.     Growing literate population:

According to Index Mundi, 49.1% of Ethiopian population can read and write. This roughly matches to the young and adult population indicated above.

3.     Huge population with unmet e-payment needs:

According to the Global Findex 2017 report, bank account ownership in Ethiopia, has grown from around 22% of the adult population in 2014 to around 35% of the adult population in 2017. On the other hand, from those who have bank account in 2017 only around 12% use their account to make or receive digital payments.

4.    Huge and yet growing number of mobile subscribers:

EthioTelecom (the telecom monopoly in Ethiopia) has reported in February 2018 that the number of its mobile subscribers has grown to 64.4 million. In the previous statistics reported by EthioTelecom about 2/3 of the total subscribers were active users. Assuming that similar ratio may work for the February statistics we can safely estimate that there were around 43 million active subscribers in February 2018, if not more.

5.   Growing availability of more affordable smartphones in the local market:

Even though the number of smartphone users in Ethiopia is small (4% in 2015, according to Pew Research Report 2016) and the large proportion of mobile users are feature phone users, recently the smartphone users is growing, due to the growing availability of more affordable smartphones in the local market. According to statCounter GlobalStats Mobile Vendor Market Share in Ethiopia (May 2018), Samsung has 29.94% share, Huawei 25.67%, Tecno 12.19%, Unknown 11.14%, Nokia 7.19%, and Itel 3.27%. The market share of more affordable smartphones for local users, like Tecno and Itel, has grown from 6.96% and 1.55 respectively in May 2017 to 12.19% and 3.27% respectively in May 2018.

6.      Growing businesses:

Ethiopia has growing market for consumer products, due to its huge population and demographic structure with huge very young population. (Note around 73% of the Ethiopian population is under the age of 30). The growing economy coupled with the young population has made Ethiopia a very fertile ground for growth of Fast Moving Consumer Products (FMCG) market which is demonstrated by not only the growing businesses by local traders and manufacturers but also growing foreign investment in FMCG (e.g. Beer). It is well known that growth of business for FMCG creates greater opportunity for the growth of electronic payment, since it is believed that users of electronic payments are mostly end-customers and most payments are C2B (Customer to Business). The growing businesses also provide opportunity of huge potential for B2B (Business to Business) payment.

7.      Growing telecom and electric power infrastructure:

Due to the huge public investment on infrastructure in the last more than 20 years, the existing sizable and still growing telecom and electric power infrastructure paves favorable ground for the growth of e-Payment in Ethiopia.

8.      Operational Interbank ePayment Infrastructure:

Ethiopia has operational interbank ePayment infrastructure connecting all Banks. The infrastructure supports card (ATM, POS), mobile, and internet channels. This infrastructure, branded “ethioPay” is owned and operated by EthSwitch S.C. which is established by shareholding of all Banks in Ethiopia.

9.      Huge Ethiopian Diaspora:

According to the United Nations statistics (2017) on Migrant Stock by Origin and Destination, there are 1.7 million Ethiopian migrants. On the other hand, as per the RAD Diaspora Profile published in 2014, approximately 251,000 Ethiopian immigrants and their children live in the USA. Ethiopian-born immigrants account for 0.5 percent of the total U.S. foreign-born population. Such huge diaspora population creates favorable opportunity for remittance payment business.

10.   Government strategy and plans:

The government Growth and Transformation Plan II, 2015/16 -2019/20, which states that, greater emphasis will be given to strengthening modern payment, as well as the Payment System Development and the Financial Inclusion Strategies drawn by the National Bank of Ethiopia, provide favorable ground for development of e-Payment.

Bizuneh Bekele is currently operating as an independent Consultant for e-Payment and FinTech Development. As the founder CEO of EthSwitch S.C. he has led the establishment of the ethioPay, the interbank ePayment infrastructure connecting all Banks in Ethiopia, and led its successful operations until June 2018. This article firstly appeared on linkedin with the same title.

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