Ethiopia Fintech regulation and ecosystem
Fintech regulation in Ethiopia
In terms of Fintech, Ethiopia made considerable progress in recent years thanks to new regulatory changes made by the Ethiopian government. For example, in June 2020, the Ethiopian Council of Ministers approved Digital Ethiopia 2025, a national digital transformation plan that seeks to adopt cutting-edge technologies to ensure economic growth and social development. Furthermore, in March 2020, the National Bank of Ethiopia issued a new Directive on issuers of payment instruments, allowing local non-bank players, including mobile network operators, to offer mobile money services (Fintech news, 2021) in support of Ethiopia’s digital transformation. The institution is currently working on a new project called Digital Ethiopia Foundations, under which it plans to invest around $ 200 million to support the country’s digital economy. (Ecofinancial, 2021). Moreover, in September 2019, the government proposed that any company registered in the country could apply for a mobile money license as long as it is 100% owned by Ethiopians or non-nationals of Ethiopian origin and has a minimum capital of BIR 50 million.
In terms of data privacy, dishonest digital lenders who share personal data of loan defaulters will be stripped of their operating licenses if Parliament passes proposed changes to the law to curb the abuse of confidential records. The National Finance and Planning committee of the National Assembly has added a clause to the Central Bank’s 2021 Amendment Bill, which gives the banking regulator powers to revoke the permissions of digital lenders who violate the confidentiality of personal information to pursue to delinquent borrowers (Business daily, 2021)
While Ethiopia’s Fintech ecosystem is relatively small, the government’s supportive stance towards the digital economy and favorable market conditions, including high mobile phone penetration and a large unbanked population, are causing the Fintech industry to Ethiopia is poised for strong growth (Fintech News, 2021). So far, the payments sector is the largest in Ethiopia.
Ethiopia Fintech Lending
In terms of lending Fintech companies in Ethiopia, Agar Fund is Ethiopia’s first and largest crowdfunding platform. It was founded in 2019 and is defined as place where individuals with causes and registered organizations come on board to mobilize society for their campaign In Ethiopia. By using this portal, Charities, Religious organizations, Startup and entrepreneurs, Education support, sport clubs and projects and other change makers can ensure their big dreams come true, by enlisting the help of people all over the world.
Among its crowdfunding categories are charity & civil societies, startup & entrepreneur, medical, education, religious, art and design, sports, among others.
Microfinance in Ethiopia
Dedebit Credit and Savings Institution (DECSI) is a microfinance institution operating in Tigray Region, in northern Ethiopia. It has over 460,000 customers and as such DECSI is regarded as one of the four largest MFIs in Africa. Founded in 1994, their aim is to help increase agricultural production, stimulate the local economy, reduce the influence of moneylenders and increase incomes of the poor.
Another important microfinance company in Ethiopia is The Specialized Financial and Promotional Institution (SFPI). It started its operations in 1998and as of June 30, 2019 total asset, total capital and loan outstanding balance of SFPI over 449 million,125 million and 313 million respectively. Nowadays SFPI has 23 branches and 12 sub- branches which provide financial service such as credit, saving and credit insurance to over 69,500 clients in both rural and urban areas.
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