Telebirr Launches Credit, Saving, Overdraft Services

Ethio Telecom has launched its long-anticipated micro-credit (loan) and saving scheme through its Telebirr mobile money platform.

The state-owned telecom operator, in partnership with Dashen Bank, launched Telebirr Mela, Telebirr Sanduk, and Telebirr EndeKise, today at Skylight Hotel, August 5, 2022.

Telebirr Mela is a microloan service that allows users to take out small loans without collateral based on their credit score. Telebirr Sanduk enables users to save money and earn an interest of 7 p.c on it.

Meanwhile, Telebirr EndeKise allows users to overdraw on their telebirr account when they have insufficient funds to complete a transaction.

The digital financial products are available in the application and through telebirr’s USSD number. 

Currently, the maximum loan limit allowed on telebirr Mela is 10,000 birr for individuals and 100,000 birr for businesses. The overdraft, which is only available for payment, has a limit of 2000 birr.

Customer credit scores in Telebirr will be calculated based on six-month telebirr transactions and telecom usage.

To increase their loan limit, telebirr users will have to actively use Ethio Telecom’s voice, data, and telebirr to pay bills, among other data points.

The frequency of loans users take, as well as the period they take to repay the loans, are taken into consideration in setting the loan amount and interest.

Users will pay 1 pc in interest on daily loans, 3 to 6 pc on weekly loans, and 6 to 10 pc on monthly loans.

Regulators at the National Bank of Ethiopia (NBE) gave the go-ahead to Ethio Telecom in May this year, and the state-owned telecom has been working on it since.

The funds for the loan come from Dashen Bank, the 26-year-old bank that netted 1.73 billion birr in profits last year. During the same period, Dashen Bank mobilized nearly 75 billion BR in deposits, a 39 percent increase.

The telebirr digital payment platform had over 22 million subscribers and transacted over 32 billion birr worth of electronic money. The platform has integrated 13 banks and 37 international remittance service providers.

In 2018, Ethio Telecom began offering users who ran out of pre-paid airtime credit. According to a 2020 report, Ethio Telecom’s airtime credit is used by 2 million users every month, with a monthly loan value of 1.1 billion birr. Ethio Telecom earned an estimated net revenue of 200 million birr from this service in 2020.

Telebirr’s loan service comes as Safaricom is on the verge of launching its telecom services in Dire Dewa. In Kenya, Mpesa savings and credit service M-Shwari is being used by millions.

The lack of access to capital as well as collateral-free loans has long been cited as a hindrance to Ethiopia’s economic growth.

According to a World Bank report, access to finance has consistently remained one of the top constraints for businesses in Ethiopia, where enterprises surveyed identified that as the major constraint to their development, far ahead of any other constraint.

Kenya has seen a proliferation of digital lenders targeting the banked and unbanked alike. Over 40 million dollars were disbursed in the first three months of 2022 alone via digital lenders.

Safaricom has various savings and loan services in Kenya, such as KCB-Mpesa and Mshwari.