Ethiopia eyes $150 million fee for Safaricom's M-Pesa entry

Tuesday February 21 2023
Safaricom headquarters Nairobi

The Safaricom-led consortium in Ethiopia will pay $150 million (KSh18.9 billion) as licence fees to roll out M-Pesa in the populous nation. PHOTO | FILE | NMG


The Safaricom-led consortium in Ethiopia will pay $150 million (KSh18.9 billion) as licence fees to roll out M-Pesa in the populous nation if the proposed regulations by the Horn of Africa country are passed.

The amount referred to as an investment protection fee is contained in the proposed rules that will guide the licensing and launching of mobile money operations such as M-Pesa.

“A foreign national applicant shall present evidence for the payment of $150 million or equivalent in another foreign currency for investment protection fee,” reads the draft published by the National Bank of Ethiopia, the country’s banking sector regulator.

An investment protection fee is the amount paid by foreigners to invest in businesses exclusively reserved for domestic investors or the government.

Restricted access

The amount will be in addition to 50 million birrs (KSh117.81 million) that Safaricom will have to pay in cash as paid-up capital and the amount deposited in a bank account with restricted access.


The National Bank of Ethiopia is on Tuesday expected to hold a consultative meeting with officials from Safaricom Ethiopia, Ethiopia Telecommunication Authority and those from banks, microfinance banks and payment system operators to discuss the draft.

Mobile money in Ethiopia is set to lift the profile of M-Pesa, which has been raising its stake in Safaricom’s revenue mix since its launch in 2007.

M-Pesa accounted for KSh107.69 billion ($853 million), 39.9 percent, of the telco’s KSh269.86 billion ($2.1 billion) total mobile service revenue for the year ended March 2022.

M-Pesa expected to thrive

Ethiopia is home to more than 112 million people, making it the second-largest country in Africa by population, and M-Pesa is expected to thrive given the large population that is unbanked.

A Safaricom-led consortium —which also includes Vodacom and Vodafone — was in May granted a telecom licence in Ethiopia following a KSh107 billion ($850 million) bid but has been unsure of what it would take to get an M-Pesa licence.

The draft directive on licensing and authorisation of payment instrument issuers now makes it clear that Safaricom will have to pay additional money to get a mobile money licence.

If the proposal is passed in its current form, Safaricom will be required to launch M-Pesa within six months of getting the licence.

Safaricom chief finance officer Dilip Pal said last November Safaricom was already preparing for the launch as soon as it acquires the licence.

“I think that’s the work that we are currently doing to make sure that our ability to launch in time, we can do it pretty fast, that we are not waiting sequentially to create those capabilities,” said Mr Pal.

Bridge loan

Safaricom has already tapped a KSh50.44 billion ($400 million) bridge loan to fund early costs of launching in Ethiopia launch and hopes to break even in the fourth year of operation.

Safaricom CEO Peter Ndegwa said last November the bridge loan was taken in Safaricom Kenya books but the telco is keen to bring external debt into the books of the Ethiopian unit.

Among other requirements will be a 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.

M-Pesa license will help Safaricom take mobile money service competition at the doorsteps of state-owned Ethio Telecom, which launched a new mobile financial service called Telebirr in May 2021, attracting millions of users within weeks.

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. No clarity has been given on how the classification will be made.

Other uses

Ethiopia’s banking regulator is keen to support mobile money for other uses such as tax collection and salary payment and will be granted limit waivers in such cases.

“The National Bank may, upon a written request from a payment instrument issuer, grant exceptional authorisation for the payment instrument issuer to exceed the aggregate daily transaction limit for internal inward remittances, salary payments and tax payment services,” says the bank.

The Ethiopian market had largely been closed to external investors but started relaxing the stance in 2019 through an economic reform agenda, with the support of the International Finance Corporation.