(Addis Ababa) – Safaricom’s M-Pesa service, launched in Ethiopia in August 2023, is gaining popularity for buying airtime and data, but struggles to match the success it has had in Kenya, where it leads in mobile financial services. Despite growing its user base to 8.31 million subscribers, the Ethiopian market has proven more resistant to adopting M-Pesa for cash transfers, borrowing, or insurance.
Ethiopian consumers are predominantly using M-Pesa to purchase airtime and data, a surprising twist for Safaricom, which initially expected the platform to facilitate broader financial services, including money transfers. According to Wim Vanhelleputte, CEO of Safaricom Telecommunications Ethiopia Plc, 20 percent of M-Pesa’s sales are related to self-top ups for airtime and data. However, M-Pesa’s overall contribution to Safaricom’s revenue in Ethiopia remains low, accounting for just 0.58 percent, amounting to Sh24.4 million.
While M-Pesa has transformed the financial landscape in Kenya, with over 50 million customers across seven African countries, its Ethiopian journey has been slower. The Ethiopian market, with a population of 120 million, presents a significant opportunity for Safaricom, but it remains dominated by cash transactions, which make up 99 percent of small-value exchanges. The use of cash has been a major barrier to the growth of digital payments in Ethiopia, contrasting sharply with Kenya, where mobile payments helped Safaricom scale M-Pesa’s success after its 2007 launch.
Despite these challenges, Safaricom remains optimistic. The company has noted a shift towards voice and data services in Ethiopia, which could help drive M-Pesa usage. The company plans to encourage the growing number of voice and data users to also adopt M-Pesa for financial services, including lending and insurance. Safaricom hopes that by targeting these users, it can expand M-Pesa’s reach and make up for its slow uptake in other areas.
The company has seen growth in its customer base, with 6.1 million active customers reported for the period ending in September. This growth is supported by the expansion of Safaricom’s network, which reached 3,008 base stations, up from 2,057 in the previous period. While Safaricom is focused on expanding its subscriber base, it also seeks to stimulate more usage among existing customers and create opportunities for monetization through services beyond airtime and data.
In Ethiopia, cash remains the dominant payment method, as highlighted by a 2021 World Bank report on digital payments. The report pointed out that the country’s cash-centric culture poses a challenge for Safaricom’s push into mobile financial services. Unlike in Kenya, where remittances from urban to rural areas helped M-Pesa grow, Ethiopia has fewer cash transfers between urban and rural populations. This makes it harder for Safaricom to replicate the success it enjoyed in Kenya, where cash transfers were a key driver for M-Pesa’s expansion.