Will M-Birr Catch On In Ethiopia Like M-Pesa Did In Kenya?

Will M-Birr Catch On In Ethiopia Like M-Pesa Did In Kenya?

Reports have been circulating for at least three years that Ethiopia is launching M-Birr, a mobile electronic payments service named for the country’s currency.

So far just 150,000 users have signed up for M-Birr in Africa’s second most-populous country of 94.1 million people, with a hugely underdeveloped banking system, AFP reported today.

In January 2013, AfricanBusinessMagazine announced the rollout of M-Birr, the country’s first mobile money transfer system. The system was based on the highly successful model pioneered by Safaricom’s M-Pesa in Kenya, the report said.

With a population of 44.3 million — less than half of Ethiopia’s — Kenya has nearly 18 million mobile money users, according to AFP.

In February 2015, Reuters reported that an Ireland-based firm was rolling out M-Birr. The plan was for Ethiopian banks and institutions to offer the service to customers and hold the cash. The Ethiopian government bans foreign firms or banks from investing in the country’s financial or telecoms sectors.

AFP today confirmed the 2015 rollout of the M-Birr service, created by Irish company MOSS ICT in collaboration with several banks and five Ethiopian micro-finance institutions.

The M-BIRR service only commercially launched in Sept 2015, according to James Noctor, co-founder at M-Birr Limited, in an email to AFKInsider.

“Though it started in 2013, the central bank had limited the roll out to a tiny number of points of presence,” Noctor said. “Authorization for a full M-Birr commercial rollout came in 2015.”

So will M-Birr catch on in Ethiopia the way M-Pesa did in Kenya? Perhaps the answer lies with South Africa.

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Anyone who has recently spent time in Kenya, Zimbabwe or Tanzania has seen the influence of mobile money on everyday life, TechCentral reported in July 2015. People use it to buy airtime, pay taxi drivers and make loan payments.

Mobile money has revolutionized financial services in these countries, lowering transaction costs, increasing financial inclusion and providing consumers and small businesses with easy, cheap and safe ways to do business.

The data these customers provide generate information on their buying and payment behavior, improving their chances of securing loans and financing that might otherwise be unavailable.

Despite these game-changing developments, early efforts at launching mobile money in South Africa failed, including Vodacom’s M-Pesa. That hasn’t stopped Vodacom and MTN from relaunching their services, TechCentral reported.

South Africa has a more sophisticated financial system than other African markets and more people already have access to financial services, according to TechCentral. There are already cheap ways to transfer money such as Shoprite’s service (cost: 70 cents US) that allows customers to send money to any Shoprite branch in the country.

South Africa’s rigid regulatory framework is cited as another area holding back development in mobile money. Proponents say a key to M-Pesa’s success was the flexibility of Central Bank of Kenya. South Africa is harder to navigate.

This forces providers to partner with banks in complicated joint ventures where banks naturally would like to see the mobile money product do well, but not too well, TechCentral reported.

This approach stifles innovation and disruption which would benefit consumers, especially the poor.

Unbanked Ethiopians

Fewer than a fifth of Ethiopians had a bank account in 2014, compared with 75 percent in neighboring Kenya, according to the World Bank, AFP reported.

But Ethiopia has had nearly 10 percent economic growth over the past decade, according to the InternationalMonetaryFund.

The Ethiopian government set a 2020 target date to increase the number of bank account holders to 80 percent and double the number of bank branches in the country.

Development of the banking sector still faces challenges in Ethiopia’s tightly controlled economy, according to AFP.

“Ethiopia is a highly regulated country. The two most controlled sectors are telecommunications and financial services, exactly the two sectors we touch,” said Thierry Artaud, the M-Birr manager. “It’s very sensitive.”