Safaricom in ‘advanced talks’ to take M-Pesa to Ethiopia

Safaricom is in “advanced talks” with the Ethiopian government to introduce its popular M-Pesa mobile money service to neighbouring Ethiopia, a market of 100 million people, two sources said on Tuesday.  Britain’s Vodafone, Safaricom’s parent company, will license the use of the M-Pesa trade name to an Ethiopia-based bank while Safaricom will host the servers in Nairobi, one telecoms industry said. Started in 2007, M-Pesa has nearly 30 million users in Kenya.

M-Pesa could transform Ethiopia’s economy, as it has done in Kenya, by allowing people to sidestep a decrepit and inefficient banking system and send each other money and make payments at the touch of a button. As such, it could bolster the bold political and economic reform drive of new Prime Minister Abiy Ahmed against opposition from hardliners in the ruling EPRDF coalition.

Started in 2007, M-Pesa has around 20 million active users in Kenya and has become the principal driver of profit growth for the dominant telecoms provider in East Africa as revenue from traditional voice and text services has flattened off. Over the last decade, it has evolved from a basic money transfer service to a financial platform offering savings, loans and insurance products in conjunction with local lenders.

Safaricom was likely to be paid 10-25 percent of annual revenue from the new M-Pesa business in Ethiopia for providing the back-end of the technology, analysts said, citing the arrangement in place when Safaricom itself had to pay another company that hosted its M-Pesa servers in Germany before 2015, when they were moved in-house to Kenya.

The ability to access digital banking services is likely to be a game-changer for Ethiopians whose banking sector is stuck in the 1900s, with no way to transfer funds from one bank to another.

“New products, new services such as digital banking and investment banking are required because the banking sector is archaic and is not up to what the economy is requiring,” said Addis Ababa-based economist Eyob Tesfaye.

“Financial sector reform is key to continued economic growth.”