Ethiopia’s Biggest Private Bank Partners with M-Pesa for Digital Credit, Saving Services

Awash Bank, Ethiopia’s largest private commercial bank, has entered a strategic partnership with mobile money provider M-Pesa to offer digital microcredit and savings services. The pair launched “errif be MPESA”, a digital overdraft credit service at the Bank’s headquarters early Monday morning to set off the partnership. Currently available to all 90-day MPESA customers, it enables customers to make M-Pesa transactions when they are short on balance. This includes airtime top-ups, bundle purchases, utility payments, and merchant payments, as high as 3,000 Birr, depending on the customer's credit history.

Titus Muchai, Product Lead of Savings & Credit at MPESA, says the rollout of such types of products requires a partnering bank. He explained how “errif be MPESA’s” low risk nature enables the gradual build-up of customer credit behavior while also availing quick credit relief in the meantime.

“Based on this product, we will start building credit behavior for other, more risky credit products we’ll be giving in the market,” Titus told Shega.

He added that they are pursuing an aggressive limit growth strategy, which is predicated on customer behavior on Safaricom and MPESA platforms. Customers who are borrowing and repaying on time will ideally see their credit limits grow, according to the product lead.

The overdraft service charges a three percent access fee when funds are drawn, along with a daily maintenance fee capped at 5 Birr. To encourage adoption, M-Pesa is waiving the daily fee for the first two days of each borrowing cycle. While the overdraft service is currently available to 90-day active MPESA customers, a national rollout to all Safaricom customers is planned contingent on regulatory approval. A savings service, more credit products, and potentially investment products are also in the pipeline. 

In Kenya, M-PESA offers a long list of financial services, including microloans, savings, and investments through partnerships with several institutions.

Tsehay Shiferaw, CEO of Awash Bank, lauded MPESA as a brand synonymous with the start of mobile money service in Africa. He expressed his belief that their partnership will reshape the financial landscape in Ethiopia by expanding inclusion and familiarizing data-driven credit facilities.

“The strength of our conventional bank and the convenience of mobile money,” the CEO surmised the nature of the partnership.

Elsa Muzzolini, CEO of Safaricom M-Pesa Mobile Financial Services, also echoed the importance of partnerships with banks for the success of fintech services.

Awash Bank, which reported gross profits of 22 billion Birr in the last financial year, is the best performing private bank in Ethiopia across several metrics.