BY EYERUSALEM HADGU – Since the launch of mobile banking services in Ethiopia by MBIRR in September 2015, I have spent eight years in this sector. Throughout this time, I have participated in various conferences focusing on digital financial services, particularly payment systems.
A recurring theme in the panels and presentations at these events is the financial industry’s collective goal of creating cashless transactions. While it is essential to transition into the digital realm, it is important to recognize that this does not mean the complete dissolution of cash transactions. Instead, we should aim to create more seamless options for end-users and extend services to vulnerable areas. Even in technologically advanced countries that have embraced digital services, cash remains a prevalent mode of transaction
Fact checking points of digital financing
In Ethiopia, our journey towards a fully digital financial landscape faces several challenges. It is crucial to open avenues for education regarding the benefits of both cash and digital transactions. Currently, our banking system is highly concentrated, with numerous options including 32 banks and 2,848 bank branches across various locations, mainly in Addis Ababa and four major cities: Adama, Mekele, Bahirdar, and Hawasa. The sector also includes 403,703 agent banking points, 10,551 ATMs, 14,030 POS machines, and significant mobile banking usage with over 39 million users.
In fact, approximately 85% of the rural population must travel long distances to access banking services. To realize an inclusive digital payment ecosystem and make “Digital Ethiopia” a reality by 2025, we must ensure that essential services are distributed to those who are vulnerable and lack access to financial services.
Digital solutions must add significant value for remote rural communities that are currently unbanked. In this regard, the 53 microfinance institutions have played a significant role in serving rural people, but challenges such as infrastructure, core banking, and innovative digital services persist. Innovative solution providers, including the 13 Payment System Operators and Payment Instrument Issuers, should simplify access to these services.
According to the World Bank’s Global Findex 2022 and other reports, about 40% of Ethiopians still lack access to banking services. While strides have been made towards improving financial inclusion, obstacles like affordability, accessibility, lack of proper documentation, and limited financial and digital literacy continue to pose challenges. To optimize resource utilization, the distribution of ATM machines and POS systems should prioritize underserved areas.
The goal should not be to pit digital payments against cash but to educate and empower those in need to access financial services. To achieve this, stakeholders in the financial sector must join hands to present their services innovatively, ultimately impacting the lives of unbanked communities. By fostering collaboration and focusing on inclusive solutions, we can pave the way for a more equitable financial landscape in Ethiopia.