Ethiopia is transacting close to 300 billion Birr through financial technologies (fintechs), which is estimated to be 10% of the Gross Domestic Product (GDP), according to a fintech expert.
As the fintech coverage increases in the long run the share of its contribution to nation’s economy would be likely to increase, said Yilikal Abate, a fintech expert.
He presented survey findings focusing on “The Advantages of Fintech to the National Economy” on Thursday at Hilton Hotel. The event was organized by Addis Abeba Chamber of Commerce and Sectoral Associations (ACCSSA).
He said that during the 2020/2021 fiscal year 270 billion Birr has been transacted in Ethiopian banks through Fintechs.
Fintechs such as mobile payments, Point on Sale (PoS) machines, e-wallets implemented by banks, internet banks, e-commerce mechanisms and other digital payment systems have merits such as reducing high transaction and intermediary costs and using telecom to expand its access.
Fintechs are easing life through and saving time by reducing the time used to conduct financial transactions in Ethiopia.
Challenges pertaining to developing the technology and raising awareness, the regulation issues, especially in case of disputes about the technology, electric power interruptions, and lack of skill to mention a few are bottlenecks to implement Fintechs service in Ethiopia, according to Yilikal.
Until very recently, the enabling conditions for the emergence of a digital economy in Ethiopia were largely absent, given very limited telecom infrastructure, very high costs of network access, and very low digital connectivity rates among the general population.
Yilikal recommends the establishment of more data centers, and awareness creation among various actors in the process as a solution to solve the challenges in setting up of Fintechs.
The trend of using Fintechs has been increasing in Ethiopia. For instance, last week, Kacha Digital Financial Services Share Company (S.C.), the first licensed private mobile money service provider by the National Bank of Ethiopia (NBE) officially introduced its services, which are to be launched very soon.
Kacha envisions providing its financial services to the unbanked Ethiopia’s population.
Kacha will provide a bundle of services, which are not common in the financial sector, according to Kacha officials.
Opening wallet accounts, cashing in and out, micro-saving, uncollateralized microcredits, micro-insurance, direct payments, bill payments, international remittance, fund transfers, airtime top-up, card payments, and other cutting-edge services are among the services, which will be offered.
Kacha will work with agents across Ethiopia and partners up with governmental, Non-Governmental Organizations (NGOs) and other stakeholders across the country.
More than 30,000 agent networks across the country will be able to offer cashless transactions through the Kacha mobile money platform. Kacha, which has a registered capital of 200 million Birr, heralds the start of a new era for expanded private sector involvement in the framework of the country’s digital financial services.