In a bid to develop a financial policy which accommodates financial technology (Fin Tech) the Ministry of Innovation and Technology brought together regulators and operators in the industry. Led by Dr. Eng. GetahunMekuria the meeting clarified the opportunities, challenges and policies that would help innovative technology driven companies reach their full potential in Ethiopia.
Fin Tech describes a variety of financial activities such as money transfers depositing a check with your smartphone, bypassing a bank to apply for a loan or managing investments without a middle person.
Successful Fin Tech companies like Deliver Addis and Apposit talked about what they have been able to accomplish, using the existing legal framework and infrastructure.
FelegTsegaye, who founded Deliver Addis, an online food delivery service, mentioned that his company now employs over 400 people and works with 40 restaurants. People can use their mobile app to order food from the menus online and have it delivered to their location.
Established three and a half years ago, the company, now transacts over a million birr per month. When the customer orders food online the motorbike driver takes the order, picks it up and then collects the payment from the customer.
“Since our business is getting busier as the traffic and gas problems push people to order food wherever they are, we are experiencing a payment modality problem,” said Feleg. “We can agree with banks to use the payment but now we don’t want to engage with many institutions. If there is one payment modality online, it will make life even easier. We use our own method to minimize risks with our drivers collecting cash”.
Deliver Addis, did not want to build everything by themselves so round table meetings are critical in order for them to reflect on the real problems they face in the absence of strong Fin Techs.
An example of a platform that Deliver Addis is asking for is Apposit in Nigeria which provides access to digital payments in partnership with Paga Payment. Paga now has more than 11million customers and generates over USD 30 million in income.
Ethiopia’s financial policy has not allowed Fin Techs to grow. However, the National bank of Ethiopia was represented in the meeting to hear the successes and needs of participants it the industry.
The participants asked for the financial regulatory body to allow a virtual wallet. Also the issue of Intellectual Property(IP) for the specific operation is asked for in addition to using an IP to access finance. Most Fin Techs raised the issue that the only property they acquire is the patient over their system and the fact that banks only use physical collateral is discouraging and backward.
Stable policy was seen as a major concern. Three company representatives state that they lose from 1.5 million birr to USD eight million for operation costs. They mentioned that they would begin operating and NBE would find a way to ban their activities.
Investors stated that when they would invest they would attempt to follow proper procedures but then the laws would change. They stated this is why it is leading companies to participate in illegal business after denied the legal one.
“We reached into an agreement with Ethio-telecom be an electronic top-up agent but then NBE sent a two-page letter to the telecom and it just stopped,” said one of the operators. “The Bank sometimes issued circulars which are against the constitution but everyone implements them without questioning.”
Organized information was another major concern. Companies need this to change especially with regard to credits in order for them to be able to operate in the future. The Absence of a National ID and the lack access to criminal, court and other records were things they wished to see improve.
Tech representatives pointed to the aging of policy makers in a youthful country.
“In Ethiopia people over 45 years are about 7 percent of the population and yet the nation’s policy is made by them,” said one of the attendants. “Large scale research on the need and character of the new generation has to be made and young professionals must participate in the policy enactment.”
Government agencies were seen as archaic including the Information Network Security Agency.
Among the participants, many exemplified Apposit to be the second leading payment system overseas.
“The main reason for the financial policy to fail is it is made to benefit one bank that is the Commercial Bank of Ethiopia,” a participant said to many nods in the room.
“The relationship between the two should be neutralized as it is making the economy pay the price,” said another participant.
The dialogue addressed the concerns and frustrations of the financial technology enterprises as government representatives tried to explain shortcomings.
Getahun Nana, former vice-governor of the National Bank said he would take responsibility for past mistakes as he was part of the policy made at the time. The main role of the bank is to make sure the nation has a stable financial environment and that it is secure from threats. He stated that the nation has moved forward in digital awareness, but has not achieved much. The dialogue is set to continue in order to develop a concrete policy. (capitalethiopia)