Amendment revisions underway to welcome foreign fintech firms
The national payment system proclamation amendment which will allow foreign investors to play as a payment system operator or instrument issuer has been filed to the relevant standing committee of parliament for further revisit.
The 2011 proclamation that came to life about three years ago following the implementer directives issued by the National Bank of Ethiopia (NBE) is now being revised to include foreign fintechs to invest and play in the financial sector separately or in partnership with local investors.
Unlike the current proclamation No. 718/2011, the draft proclamation has stated the paid up capital issue.
Article 6 sub article 6 of the draft proclamation said that an applicant for payment instrument issuer and payment system operator shall fulfill a minimum paid up capital as may be prescribed by the NBE directive.
Currently, the proclamation which is being used has not mentioned about the paid up capital though the ‘licensing and authorization of payment instrument issuers directive no.ONPS/01/2020’ that was issued in 2020 stated that a minimum paid up capital of 50 million birr shall be contributed in cash for those who want to invest in sector.
Solomon Damtew, Acting Director of Payment and Settlement System Directorate at NBE, said that one of the reason to amend the former directive is to correct and bridge such kind of gaps.
“When business entities enter the market capital, this will be essential and thus the article is included on the draft document,” he told Capital.
The new draft directive opened the sector for foreign actors and article 6.7 indicated that foreign nationals may be allowed to engage in a payment instrument issuer or payment system operator business; or establish a subsidiary which shall be licensed as a payment instrument issuer or payment system operator.
Sub article 8 explains that foreign nationals and Ethiopian organizations fully owned by foreign nationals shall engage in a payment instrument issuer and or payment system operator business through raising capital fully paid in foreign currency.
Sub article 9 also said that if foreigners have partial share on the fintech their capital must be paid in an accepted foreign currency.
Payment in foreign currency for joining protected sector has also been mentioned on sub article 12 of the same article, while the amount will be disclosed by the directive that NBE will issue.
Regarding the capital, experts said that the 50 million birr minimum paid up capital is high compared to the experience of others. So the regulatory body is not expected to change such amounts for foreign investors and thus entrants will need to come up with foreign currency to fulfill the paid up capital.
So far Ethio Telecom’s tele birr and Kacha Digital Financial Services are the two operators who are involved in the business whilst Safaricom Ethiopia is awaiting the ratification of this new proclamation to introduce its popular mobile money service, M-Pesa.
Recently Solomon said that the proclamation amendment will be a game changer since it allows well known and experienced foreign companies to invest on the market.
“Following the amendment of the proclamation, the ecosystem will be opened which means that highly experienced foreign companies will enter into the Ethiopian payment system,” he recently said in an NBE meeting with bank presidents that was held two months ago.
“The move will uplift the success that we have so far achieved on the sector and will foster the use of a cashless economy in addition to ensuring financial inclusion besides strengthening the digital payment ecosystem,” he added.
NBE, a financial sector regulatory body, is developing detailed directives that will allow provision of a license for the incoming operators.
Despite being about a year and half into its operations, telebirr has managed to convert a subscriber base of half of the state owned telecom provider users to mobile money users.
According to the proclamation, national payment system consist sending, receiving and processing of orders of payment or transfers of money in domestic or foreign currencies, and issuance and management of payment instruments and payment, clearing and settlement systems.
The draft document added that payment service providers, including operators, participants, issuers of payment instruments and any third party acting on behalf of them, either as an agent or by way of outsourcing agreements, may entirely or partially operate in the country.
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