The National Bank of Ethiopia (NBE) issued a directive allowing businesses to engage in the electronic payment systems that would extend to various services.
The directive dubbed: “Licensing and Authorization of Payment Instrument Issuers”, places a set of rules for businesses to engage in the electronic payment systems.
According to the directive issued on April 1, 2020, the central bank said that businesses, termed as payment instrument issuers, may provide services such as cash in, cash out, local money transfers including domestic remittance, load and transfer to card or bank account, domestic purchases from physical merchants, and inward international remittances among others. The issuers may also be eligible to provide micro saving, micro credit, micro insurance and pension services up on a go ahead from the NBE.
An enterprise fully owned by the Ethiopian government or a share company could venture into the e-payment system. A company that intends to engage in the business of payment instrument issuer, it is required to have a minimum paid up capital of 50 million birr with no one person holding a share of exceeding 20 percent. Apart from these, the company needs to have at least ten shareholders.
The applicant shall preset comprehensive documents that demonstrate its ability to manage the system and allocate the required resources, and pay a non-returnable 5,000 birr for the process. This comprehensive document includes both financial and technical capabilities of the company.
After reviewing the documents submitted, the NBE could reject the request on a number of grounds. The directive states that applications could be rejected if, the applicant or its owners have been convicted of a crime involving a financial transaction; the application and its accompanying documents contain false information; the applicant fails to give any response to a request from the National Bank, within ten days; the submitted documents are incomplete, ambiguous or misleading; and the intended payment instrument to be issued or its related service poses risk on users or the national payment system. But the applicant can apply again after rectifying the causes for the rejection.
Any applicant that received approval from the Bank to provide the services shall implement a set of measures for the management of the e-account. The directive provides that all “electronic accounts and payment instruments shall be denominated only in Ethiopian birr; payment instrument issuers shall exchange funds for equal monetary value of electronic money or vice versa, all transactions made against an electronic account shall only be made electronically and in real time, to ensure maximum protection on transactions related to electronic account, all transactions shall have single factor authentication, like user created personal identification number; and two-factor authentication shall be applied for transaction amounts greater than Ethiopian Birr 1,000, a user shall be entitled to receive an electronic receipt for transactions related to its electronic account or a physical receipt shall be given to the user as a replacement in the case when it is difficult to provide an electronic receipt, the details of the receipt shall include at least: date, time, unique reference, amount, type of
transaction, any fee and details of transacting counter party.”
It also requires an issuer to put in place at least three categories up on opening of an e-money account. The first level with a maximum balance of 5,000 birr with an aggregate daily transaction limit of 1,000 birr and an aggregate monthly transaction of 10,000 birr. The second level shall have an account balance of 20,000 birr with 5,000 birr and 40,000 birr daily and monthly transaction limits respectively. The third level is slated to have an account balance of 30,000 birr with 8,000 and 60,000 birr daily and monthly transaction limits respectively. E-accounts belonging to agents and merchants do not have limits on balance and transaction.
The directive which rationalizes that it is important to promote safety and efficiency of the payment systems, innovative payment instruments are important to increase the use of financial services, establishing clear and enabling regulatory requirements are necessary to protect the interests of users of payment methods, and oversight is key to mitigate associated risks and maintain reliability of payment instruments, is expected to encourage businesses proliferate in the sector. Internet and phone service providers like Ethio Telecom will also have the chance to venture into the sector and profit out of their more than 40 million customers out of which the majority rural dwellers are unbanked.