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M-Pesa’s foray into Ethiopia marks start of a mobile money showdown

As Safaricom introduces M-Pesa in Ethiopia, aiming to replicate its immense success in Kenya, a battle with the existing market leader is imminent.

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

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Over 2.7 million Safaricom customers who have signed up since Safaricom started operations in Ethiopia in 2022 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. We will continue to broaden the services our customers receive from the M-Pesa platform,” said Safaricom Ethiopia interim chief executive officer, Stanley Njoroge on 18 August, in an announcement that the service was live in Ethiopia.

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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 21.03 billion, worth Ksh 35.86 trillion ($248 billion), in the financial year ending March 2023, an increase from the 15.75 billion, worth Ksh 29.5 trillion ($203 billion), the year before.

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.

In August, Kenya’s central bank approved an increase of the daily M-Pesa transaction limit from Ksh 300,000 ($2,079) to Ksh 500,000 ($3,465), highlighting the service’s growing popularity among small businesses.

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According to Safaricom, M-Pesa has enabled massive growth in financial inclusion in Kenya, with over 90% 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, the National Bank of Ethiopia.

The licensing and activation now puts M-Pesa in direct competition with Telebirr, which started operations in 2021.

In its 2022-2023 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, with no 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 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 so as 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.

M-Pesa has more than 51 million customers in Kenya, Tanzania, Lesotho, the Democratic Republic of Congo, Ghana, Mozambique, Egypt, and now, in Ethiopia.

GSMA’s State of the Industry Report on Mobile Money 2023, shows Africa’s mobile money transactions grew by 21%, or $44.9 billion, to be worth $836.5 billion in 2022. The continent accounted for the nearly two-thirds of $1.26 trillion transacted globally.

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

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