Rethinking Siloed Phone Loan Schemes as a Path to Financial Inclusion in Ethiopia

Phone loan schemes may put devices in people’s hands, but without electricity, connectivity, and digital literacy, they rarely deliver real financial empowerment. In rural Ethiopia, where charging a phone can be harder than buying one, smartphones risk becoming liabilities rather than tools for progress.

A more sustainable path lies in bundling phones with solar power and connectivity under Pay-As-You-Go models, an approach that integrates infrastructure with finance to foster lasting inclusion, entrepreneurship, and development

This article is an output of AKOFADA (Advancing Knowledge on Financial Accessibility and DFS Adoption), a project working to increase knowledge and transparency within Ethiopia’s DFS ecosystem. 

At its core, financial inclusion is inherently pro-poor. It aims to empower groups historically excluded from the formal financial system, including low-income households, women, rural communities, and informal workers, so that they can participate in the economy on more equitable terms.

Because of this, financial inclusion should not be treated merely as a market-driven initiative or a private-sector responsibility. Instead, it ought to be recognized as a development priority on par with other foundational infrastructure investments such as electricity, clean water, roads, or health systems. Just as these services are prerequisites for modern life and inclusive growth, access to finance is critical for enabling entrepreneurship, facilitating trade, improving household welfare, and breaking intergenerational cycles of poverty.

In this context, promoting financial inclusion in Ethiopia must go beyond distributing mobile devices or expanding fintech platforms. It requires integrating financial services with essential infrastructure, especially energy and digital connectivity. Among all infrastructure linkages, the nexus between electricity and connectivity is particularly crucial. Without electricity to charge devices or sufficient network coverage, mobile-based financial services cannot be adopted or sustained. For rural communities, these two enablers are not optional; they are foundational to joining the digital financial ecosystem.

Ethiopia’s National Financial Inclusion Strategy (2021–2025) recognizes both energy access and digital connectivity as enablers of financial inclusion. However, it stops short of proposing a coordinated delivery approach that links these infrastructure sectors directly with financial service expansion. This is a critical omission, especially for rural communities where access to electricity and internet is still limited. Without joint planning and implementation, infrastructure investments may not translate into real financial empowerment.

What is needed instead is an integrated approach that brings these sectors together, where bundling energy and mobile connectivity through Pay-As-You-Go (PAYG) financing schemes, which allow households to make small, regular payments via mobile money to gradually acquire solar systems and smartphones, can create a smarter and more inclusive path forward. However, recent initiatives such as the smartphone loan scheme have adopted a siloed approach. These schemes aim to expand financial access through device distribution and repayment. While the effort is commendable, distributing phones in isolation, without ensuring access to electricity and digital literacy, risks making these devices underutilized or even burdensome.

A more effective approach lies in bundling smartphones with solar energy systems under a PAYG model. This allows rural households to gradually acquire both energy and connectivity through manageable micropayments. When coordinated effectively, this model can advance Ethiopia’s National Financial Inclusion Strategy and contribute to broader development goals. 

The Limits of Siloed Phone Loan Schemes

In April 2025, Ethio telecom launched a strategic partnership with Siinqee Bank to roll out a device financing scheme under its telebirr mobile financial services ecosystem. Backed by a 4-billion-birr agreement, the program aims to provide up to 2 million smartphones annually through installment-based financing. Customers can access smartphones with a reasonably priced upfront payment and repay the remaining amount over time via telebirr. This initiative is designed to bridge the digital divide, accelerate smartphone penetration, and expand access to digital financial services, especially among low-income and underserved populations.

However, without investments in energy and connectivity, phones alone are insufficient. Many rural residents lack electricity to charge their devices or a stable income to repay loans. Phones by themselves have little value without power to charge or the skills to use them. Without electricity and meaningful use cases, they risk becoming liabilities rather than tools of empowerment.

Instead of placing the financial burden on the poor through a heft loan rate scheme offered by commercial banks, these interventions should be government-led and donor-supported. A subsidized PAYG model would enable rural users to acquire energy and connectivity affordably, enhancing their ability to engage with financial services. Moreover, when policymakers treat financial inclusion as a stand-alone effort, detached from infrastructure development, they ignore key rural realities, such as limited electricity, poor connectivity, and low digital literacy. Integration with other sectors, particularly energy, can increase digital literacy, expand service relevance, and enhance sustainability.

Data and Gaps

According to the latest World Bank Findex data, about 49% of Ethiopian adults have a bank account, yet only 7% actively use digital financial services—with usage among women at just 13%, compared to 26% for men. This clearly shows that having an account is not the same as participating digitally.

Meanwhile, only 43.6 % of Ethiopia’s rural population had access to electricity in 2023, according to the World Bank. GSMA’s 2023 report found that just 26% of mobile phone users in rural Ethiopia actively use mobile money, mainly due to low digital literacy, lack of services, and limited power access. Across Sub-Saharan Africa, many rural users still rely on phones mainly for voice calls due to similar constraints.

This reinforces why infrastructure matters: without electricity, internet access, and user training, even an owned phone and a bank account won’t translate into meaningful, sustained use of digital financial tools. On the other hand, integrated, bundled approaches are precisely designed to close this gap by ensuring the physical, digital, and skills-based enablers are all in place.

The Case for Bundling Phones with Rural Electrification

Across Africa and beyond, portable Starlink Mini kits bundled with solar panels and power banks are increasingly available. These turnkey packages enable off-grid internet connectivity and demonstrate the feasibility of bundling energy and connectivity. While none of these kits include a phone by default, they show that it is technically viable to deliver energy and internet together.

That said, the inclusion of Starlink here serves only to illustrate the technical feasibility of energy-connectivity integration, not as a policy recommendation for Ethiopia. Instead, Ethiopia should pursue a more localized and scalable solution: solar kits bundled with phones, powered by PAYG financing, in coordination with domestic telecom and infrastructure partners.

If payments stop, the energy system disables, creating a natural incentive for consistent usage. This approach anchors phone use in a daily necessity and cultivates digital payment behavior.

Ethiopia’s Own Example: Solar + Telecom via PAYGO

In Ethiopia, Green Scene Energy, with support from UNCDF and Ethio telecom, piloted the 'SETT' (Solar Energy by Tele Transfer) initiative in April 2020. The program provided solar home systems to off-grid households, allowing payment via airtime transfers through Ethio Telecom. 

The pilot aims to reach up to 600,000 off-grid households, prioritizing women users, and shows both the feasibility and development impact of coordinating energy, connectivity, and digital finance delivery in rural settings.

Key lessons from SETT include:

• Bundling energy with digital payments can work in remote, off-grid settings using existing telecom infrastructure.

• Airtime-based mobile payments are a viable entry point for rural populations with low financial literacy.

• Targeting women and underserved groups is essential for inclusive impact.

While this is a workable solution for those who can afford to buy the mobile phone themselves, the real strength of the bundled approach lies in its potential to reach those who lack the financial means to purchase a mobile phone with 100% upfront payment. PAYG bundling enables inclusive participation by spreading costs and removing entry barriers, making financial access a reality for the most underserved.

In Kenya, M‑KOPA’s bundled solar-and-smartphone model has reached nearly 2 million first-time mobile internet users, with 62% reporting income gains, 80% noting improved quality of life, and 70% crediting the financing platform with helping them meet their financial goals.

In Uganda, Fenix International partnered with MTN Mobile Money to distribute their ReadyPay solar home systems, enabling rural households to pay as little as $0.20 per day via mobile money to access lighting and phone charging, an early model combining energy access with digital finance. According to CGAP's Digitally Financed Energy report, nearly 30–50% of PAYGo solar customers were new to mobile money, confirming that models like Fenix’s in Uganda not only provide clean energy but also bring previously unbanked users into the digital finance ecosystem. This study noted that repayment rates remained high even among rural low-income users, as energy access was tied directly to economic opportunity, such as extended working hours or reduced fuel costs.

These programs offer clear evidence that bundling energy with connectivity can not only improve digital literacy and mobile money use but also stimulate small-scale entrepreneurship and improve household welfare. In each of these cases, the availability of electricity was the first enabling condition, followed by relevant digital services and finance. Ethiopia can draw on these global lessons to build more holistic financial inclusion models that are grounded in the day-to-day realities of rural life.

Importantly, these integrated approaches reflect the core message of the Sustainable Development Goals (SDGs), particularly SDG 7 (affordable and clean energy) and SDG 9 (industry, innovation, and infrastructure), as well as Ethiopia’s own National Financial Inclusion Strategy. While the strategy emphasizes electricity and connectivity as critical enablers of inclusion, it falls short of advocating for a coordinated delivery mechanism between infrastructure sectors and financial service providers. Learning from international experience shows that these components must be delivered in a bundled, user-centric fashion to truly transform rural livelihoods.

Implementation Through Sector Coordination

Addressing Digital Literacy and Scalability Challenges

Scaling this model across Ethiopia’s diverse and geographically dispersed rural population will require proactive attention to two critical issues: digital literacy and delivery capacity. Many potential users, especially women, elders, and those in pastoralist communities, have limited familiarity with mobile technology or digital finance tools. To ensure equitable adoption, the implementation strategy must include:

• Community-based digital literacy training, potentially delivered through cooperatives, health posts, schools, and local administrative centers.

• Use of pictorial interfaces and voice-based systems in local languages to make platforms like telebirr more inclusive.

• Involvement of trusted community agents to guide first-time users and provide follow-up support.

On scalability, Ethiopia must leverage existing structures, such as rural electrification rollout plans, last-mile telecom agents, and community savings groups, as entry points for distribution. Developing standardized bundles, subsidized starter kits, and interoperable PAYG platforms can also reduce costs and streamline replication.

Implementing a bundled energy–connectivity–finance model in Ethiopia demands robust institutional alignment and shared accountability. This means designing interventions not as isolated programs, but as part of a coordinated delivery system with joint planning, implementation, and monitoring.

The Ministry of Water and Energy (MoWE) can anchor efforts on rural electrification and decentralized energy rollout, while the Ministry of Innovation and Technology supports digital infrastructure. Ethio Telecom provides connectivity platforms like Telebirr, and the National Bank of Ethiopia ensures financial safeguards and regulatory support for PAYG models and inclusive finance. Donors and climate funds play a catalytic role through capital infusions, risk guarantees, and results-based financing.

Private sector actors, especially solar kit providers, fintech startups, and digital service providers, should be incentivized to collaborate through shared investment frameworks and data partnerships. Mobile money agents and cooperative societies can also play critical last-mile delivery roles.

This level of coordination is critical not only for service efficiency, but also to avoid duplication and ensure that energy and financial infrastructure reach underserved communities together. Ethiopia's National Financial Inclusion Strategy already identifies these cross-sectoral links. Building on this foundation, implementation should adopt a whole-of-system mindset, ensuring that electricity, connectivity, and digital finance co-evolve in the same rural geographies.

Why This Model Attracts Donor Support

This integrated, bundled approach resonates strongly with the Sustainable Development Goals (SDGs) and with the values of inclusive, climate-smart development. Financial inclusion is not an end in itself. It is an enabler of a broader development agenda. It facilitates income generation (SDG 1), empowers women (SDG 5), accelerates access to clean energy (SDG 7), promotes decent work and innovation (SDGs 8 and 9), and supports climate action through clean energy transitions (SDG 13).

Donor agencies and development partners increasingly favor projects with intersectional impact, those that combine digital transformation, energy access, poverty reduction, and women’s empowerment. The PAYG bundling model aligns well with this logic. It integrates sustainable business models, social inclusion goals, and climate mitigation by connecting solar energy distribution with mobile financial tools.

Moreover, Ethiopia’s National Financial Inclusion Strategy itself highlights financial inclusion as a foundational pillar for equitable development. This vision positions Ethiopia well to attract results-based financing, blended capital, and innovation funds, especially for pilot programs that demonstrate measurable social and economic returns. The convergence of mobile technology, renewable energy, and pro-poor finance offers a uniquely compelling case for coordinated donor support.