Mobile money: Ethiopia struggles to pay the price of progress

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Elias Alemu waited more than an hour to refuel his vehicle, a Toyota Vitz, at a petrol station near Bole International Airport in Addis Ababa.

In recent months, long queues for petrol have become an unwelcome feature of daily life in Ethiopia’s capital city. Cars and trucks snake for hundreds of metres along pavements and side streets, with impatient drivers facing lengthy waits for a turn at the pump.

There is no shortage of petrol. Instead, the delays have been caused by a new payment policy instituted by the government in April. Motorists are no longer allowed to pay for petrol with cash. Instead, they must use one of two digital payment systems: Telebirr, a mobile money service offered by state-owned Ethio Telecom, or a digital wallet operated by the state-owned Commercial Bank of Ethiopia. This policy was trialled in Addis Ababa in April, and rolled out to the rest of the country in May. 

“Should any gas station be caught transacting fuel in cash after the deadline, they will be banned from the fuel supply,” said Saharla Abdullahi, the head of the Petroleum and Energy Authority.

Making digital payments is new territory for most Ethiopians. Setting up an account takes time and technical know-how, as does loading new payments. The system is buggy and often breaks down, leading to further delays.

“How come sending money through your phone takes so much time?” Alemu complained, after taking another half an hour to make the payment.

A petrol attendant had similar gripes. “What can we do? People are taking their time to figure out how mobile money works. As are we.”

The disruptive policy has its roots in the announcement, earlier this month, that the National Bank of Ethiopia had granted Kenyan telecoms operator Safaricom a licence to operate its pioneering, award-winning mobile money service M-Pesa.

When M-Pesa was introduced in Kenya in 2007, it revolutionised the economy by making it easy to make payments with a cellphone. The platform was simple and secure and allowed people to store and transfer money without having to open a bank account. Over the years, would-be competitors have come and gone but M-Pesa and Safaricom still account for 99.9% of Kenya’s mobile money market.

In 2021, Safaricom obtained a licence to become only the second mobile operator in Ethiopia. Ethio Telecom had previously held a monopoly. Since launching in October last year, Safaricom has signed up 2.8 million customers — Ethio Telecom has 70 million. More are expected to follow once it rolls out M-Pesa in Ethiopia.

In an effort to get ahead of its new competition, Ethio Telecom — and its owner, the state — has been pushing its own mobile money service hard. It’s not just petrol stations that accept only digital money. From June, all public servants will be paid using Telebirr and payment for most government services, such as electricity, will be via digital payments.

Along with Telebirr and the Commercial Bank of Ethiopia, 17 commercial banks have launched their own mobile money apps, but while this is forcing an unprecedented number of people to sign up for digital payment services, old habits die hard.

“What I’m seeing now is people have more trust in banks than non-bank institutions like Telebirr,” said Amanuel Mengistu, a trader and economics graduate. “People think depositing their money in non-banks institutions with mobile money apps is unsafe and fear they will face difficulty when withdrawing funds.”

This article first appeared in The Continent, the pan-African weekly newspaper produced in partnership with the Mail & Guardian. It’s designed to be read and shared on WhatsApp. Download your free copy here.