Open banking in Ethiopia – Open Banking Nigeria

Ethiopia

Overview

Ethiopia, with a population exceeding 120 million (est.) , is the second-most populous country in Africa. The country has experienced rapid economic growth, largely driven by agriculture and public infrastructure investments. In recent years, the Ethiopian government has shown a strong commitment to advancing digital transformation as part of its broader economic reforms. Despite this progress, open banking has yet to be formally introduced in Ethiopia.

Key Developments

Ethiopia’s fintech ecosystem has seen considerable growth due to recent regulatory changes. The National Bank of Ethiopia (NBE) issued a directive in March 2020 allowing non-banking institutions, including mobile network operators, to provide digital financial services. This has led to the emergence of key fintech players such as BelCash International, which offers open API solutions under its brand “HelloCash.” BelCash has partnered with multiple banks and microfinance institutions, offering a platform adapted for various digital banking needs including agency banking, mobile banking, and online services.

Additionally, Ethiopia’s digital finance sector is expected to expand further with increased foreign participation. Safaricom, through its local arm Safaricom Telecommunications Ethiopia, has introduced mobile money services and is planning to launch M-Pesa in the Ethiopian market. These developments are part of Ethiopia’s broader efforts to liberalize its financial services and telecom sectors, setting the stage for potential future adoption of data-sharing principles.

Opportunities for Open Banking in Ethiopia

While the concept of open banking is still nascent in Ethiopia, the potential opportunities include:

Enhanced Financial Inclusion: Given that a large portion of the population remains unbanked, open banking could provide fintech companies with access to consumer financial data (with consent), allowing them to develop innovative financial products tailored to underserved groups.
Streamlined Digital Payments: Open banking could integrate the country’s diverse digital payment services, enabling consumers to manage multiple accounts and services from a single platform, simplifying financial management.
Support for Digital Transformation: As Ethiopia pursues its national digital transformation strategy, the introduction of open banking could accelerate the growth of a digital economy by promoting fintech innovation and enhancing competition.

Challenges to Adoption

Regulatory Framework Gaps: Ethiopia currently lacks a dedicated regulatory framework for open banking, which would be essential to address data sharing, API standards, and consumer protection.
Infrastructure Limitations: Many banks in Ethiopia rely on legacy systems that may not be capable of supporting open banking APIs without significant upgrades.

Looking Ahead

The Ethiopian government’s push for digital financial reforms and liberalization of the telecom sector are positive steps towards creating an environment conducive to open banking. However, the introduction of a formal regulatory framework will be the key to unlocking its full potential. As Ethiopia continues to modernize its financial sector, we anticipate future developments in open banking and will provide updates as they emerge.

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