Ethiopia Proposes $150M Investment Protection Fee for Safaricom-led M-Pesa Rollout Safaricom-led consortium in Ethiopia has agreed to pay $1...

Ethiopia Proposes $150M Investment Protection Fee for Safaricom-led M-Pesa Rollout

Safaricom-led consortium in Ethiopia has agreed to pay $150 million (KSh18.9 billion) as investment protection fee for the rollout of M-Pesa if the proposed regulations by the National Bank of Ethiopia are passed. The fee will be in addition to 50 million birrs (KSh117.81 million) Safaricom must pay as paid-up capital and the amount deposited in a bank account with restricted access. The draft directive mandates that Safaricom must launch M-Pesa within six months of obtaining the license. The consortium, including Vodacom and Vodafone, was granted a telecom license in Ethiopia in May 2021, following a KSh107 billion ($850 million) bid, but has been uncertain of the requirements to obtain an M-Pesa license.

Mobile money in Ethiopia is expected to lift the profile of M-Pesa, which has been contributing to Safaricom's revenue mix since its launch in 2007. M-Pesa accounted for KSh107.69 billion ($853 million) of Safaricom's KSh269.86 billion ($2.1 billion) total mobile service revenue for the year ending March 2022. Ethiopia, with a population of over 112 million people, is the second-largest country in Africa by population, and M-Pesa is expected to thrive given the large unbanked population.

Safaricom has already secured a KSh50.44 billion ($400 million) bridge loan to fund early costs of launching in Ethiopia and hopes to break even in the fourth year of operation. The consortium is already preparing for the launch and, according to Safaricom's CFO Dilip Pal, has been working on creating capabilities to launch M-Pesa as soon as it obtains the license.

To obtain an M-Pesa license, Safaricom will require central bank approval of key product executives, a five-year business plan, a geographical rollout schedule, and policies around the security of the digital wallet products. The National Bank of Ethiopia is proposing an aggregate daily transaction limit of 20,000 birrs (KSh46,900) and 300,000 birrs (KSh703,600) for accounts classified as level one and level two, respectively, but it has not given any clarity on how the classification will be made.

The National Bank of Ethiopia is also keen to support mobile money for other uses such as tax collection and salary payment and will grant limit waivers in such cases. The Ethiopian market had largely been closed to external investors, but it started relaxing the stance in 2019 through an economic reform agenda with the support of the International Finance Corporation.