Shadowy Business Firm Offers Smartphones For 40% Down Payment in Addis Ababa

An uncanny marketing scheme for smartphones has been buzzing through Addis Ababa over the past few weeks, offering devices on a credit basis. Phone vendors across the capital have plastered their shops and online profiles with advertisements of the scheme, which facilitates the purchase of iPhones, Infinix, and Tecno mobiles with a 40% downpayment.

Backed up by a foreign business group, the credit scheme offers prospective customers loans worth up to 60% of the phone's value, repayable over three months at a 35% interest rate with weekly installments.

One of the 15 local agents working with the group, says no additional collateral besides the phone will be required to access the credit facility. He indicates that the phones can be blocked remotely if the debtor fails to make payments on time.

“You can purchase the phone you want from the shops we work with," he told Shega.

The Agent points out that buyers can access a phone as soon as they fill out a form, pay the down payment, and provide a copy of their identification card.

"You can pay as little as 40,000 birr for a 100,000 birr phone, and we can cover the rest. He stresses, “You can pay us back later."

According to the loan agreement obtained by Shega, the group refers to this contract as a 'User Lease & Service Agreement.' Under its terms, buyers enter into a lease arrangement with the company for the phone, with weekly payments labeled as 'rent expenses.'

The agreement states, “Party A [the company] retains ownership of the leased equipment during the lease term. If Party B [the buyer] fails to meet their obligations, does not pay the rent on time, or cannot be reached, Party A reserves the right to lock the mobile phone (with the unlocking fee to be borne by Party B).”

Apple’s mobile device management (MDM) solution allows for the configuration and locking of both user- and organization-owned devices by sending profiles and commands to the devices through wired, Wi-Fi, or cellular connections.

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Several attempts by Shega to get the official name of the group from its agents have been unsuccessful. Sources have indicated that it is a company owned by a Chinese business group. Still, an aggressive online promotion campaign promising affordability and accessibility has proliferated in recent weeks by local retailers who have partnered with the group.

Heni Mobile, a relatively famous retailer with 195k TikTok followers, is among the local businesses promoting this scheme on social media. 

However, Nigusse Redae, Principal & Founder of NRA Law Office, raises several legal questions regarding the group's operations and the loan scheme they offer.

“If the company is providing any interest-bearing loan with a license that’s not specifically designed as a financial provider, it’s illicit,” he noted.

A letter signed by Fidkau Digafe, Vice Governor of the National Bank of Ethiopia (NBE), last year forbids entering an interest-bearing loan contract based on agreements signed through the Document Verification & Registration Service. Only banks and microfinance institutions licensed by the central bank are allowed to mobilize deposits and give out interest-bearing loans.

Furthermore, the Ethiopian Commercial Registration and Licensing Proclamation restricts foreign-owned companies from engaging in financial services. It is important to note that a draft banking law proclamation, currently awaiting ratification from parliament, is poised to open financial services to foreign investment soon.

The credit scheme being floated by the group also levies a high interest rate of 35% nearly twice the banking industry average of about 18% in addition to a tight payback period. With mobile money operators like telebirr charging a maximum of 10% on non-collateral loans, the group’s levy of more than threefolds charged by the mobile money operator has raised eyebrows.