The National Bank of Ethiopia (NBE) has lifted its suspension on the digital remittance platforms, MamaPays and CashGo, working with the Bank of Abyssinia (BoA).
The regulator, which previously saw the platforms providing services they did not have a permit for, reversed its decision after three months since it ordered their ceasing of operation.
Now the ambiguity of the app’s legality in providing remittance services has been resolved, and both Mama Pay and CashGo are back in business.
“It’s a great news to hear that the central bank has lifted the suspension of remittance transfer platforms, granting the fitting venue to resume the operation,” Bersufekad Getachew, CEO of Eaglelion, the tech company behind CashGo, wrote on LinkedIn.
According to Addis Fortune, who reported on the suspension, the Foreign Exchange Monitoring & Reserve Management of the National Bank summoned Abyssinia to clarify the legality of the remittance operations through the apps and what distinguishes them from traditional money transfer services.
NBE’s law for international remittance service obliges banks to engage in international remittance services after only partnering with an internationally licensed “International Remittance Service Provider” such as Western Union.
The NBE recognizes around 72 international remittance service providers to Ethiopia, but CashGo and MamaPays were not on it. The regulation, which failed to lay out a proper way for alternative remittance mechanisms to work in Ethiopia as well as for domestic firms to launch their own services, was blamed for the restrictions.
“Regulation and Innovation have always conflicted,” wrote Vincent Diop, CEO of BelCash, in one telegram group.
The Novel but Misunderstood Quest
According to a study by UNCDF an estimated 1.3 million Ethiopian migrants globally send close to USD 5 billion back to Ethiopia every year, which accounts for more than 5 percent of the country’s gross domestic product (GDP) and about one-quarter of its foreign exchange earnings.
However, the cost of sending remittances to Ethiopia from Europe, the Middle East, and North America averages 7 percent, 4 percent, and 5 percent, respectively, of the transaction value.
The biggest gainers in remittance markets have long been a few firms whose near-monopoly costs the African continent about $2 billion annually in remittance fees.
The remittance sector in Ethiopia is also dominated by Remittance Service Providers (RSPs), which include the likes of Western Union and Money Gram.
These providers partner with local banks to facilitate transactions from abroad. Over the past years, various mobile money platforms like Hello Cash, CBE Birr, Amole, and Awash Birr have also launched remittance features in partnership with international remittance and cross-border payment service providers.
Recently, Ethio Telecom’s Telebirr has also launched a remittance service in partnership with Remitly and Thunes, with more providers expected to join.
The great majority of the remittance to Ethiopia by the above players is facilitated through SWIFT. This payment system allows banks across the globe to send messages and communicate securely and instantly about cross-border payments.
The recent entrants to the remittance scene are local technology companies who figured out a low-cost and fast remittance solution using international payment gateways instead of using the SWIFT.
Enter CashGo and MamaPays. CashGo is a remittance and crowdfunding platform launched in partnership with a local technology company called EagleLion and Bank of Abyssinia. MamPays, another remittance platform, is offered by Belcash Technology Solutions and Abyssinia.
These platforms allows people to remit funds using their Master Card or Visa Card via their mobile phones. This card-based remittance is often instant, and the receiver gets credited in Birr to their Abyssinia account. The cost of remittance transactions for these platforms is cheaper than traditional remittance Service Providers (RSPs) like Western Union. MamPays has a fixed one dollar fee per transaction, while CashGo has a service fee of 1.5 pc.
Before the regulator ordered their suspension, MamaPays had 20,000 downloads and recorded transactions of 200,000 dollars in a month before its closure.
“We are contented that the central bank cherishes the transfer protocols efforts to increase remittance. It is an absolute truth that a remittance is a critical tool in assisting the overall economic health,” added Bersufekad.