To enhance trade, financial inclusion, and economic cooperation, some countries in the Horn of Africa, including Ethiopia, Kenya, Somalia, Sudan, and Djibouti, need to set up regional payment networks. Nevertheless, it hasn’t been put into practice or operationalized among them yet.
Encouraging trade between states is one of the regional payment network’s many goals. The network seeks to facilitate and speed up cross-border transactions in order to increase trade between the nations in the area. This is especially crucial considering the high expenses and frequent delays that come with making payments across borders.
Furthermore, it seeks to improve financial inclusiveness. Through the provision of accessible and reasonably priced payment options, the network hopes to improve financial inclusion for marginalized groups in the area, such as small enterprises and those without access to conventional banking services.
Consequently, local currencies and seamless transactions are supported by a regional payment network. For instance, for companies involved in cross-border trade, the network enables them to transact in local currencies by lowering dependency on foreign currencies and dropping exchange rate risks. It also enhances economic integration. In order to assist regional integration attempts and improve general economic stability, a regional payment network can help the countries develop closer commercial relations.
Interoperability is necessary to make efficient use of the regional payment network. In other words, the network would be set up to guarantee that various payment methods and financial institutions in the member nations could work together without any problems. Security measures should be put in place to guard against fraud and cyber threats, which guarantee the security of network transactions.
Moreover, governments should develop a robust regulatory framework for using the regional payment network. Collaboration with local regulatory organizations is critical to ensuring compliance with financial legislation and fostering user trust. Ensuring or exploiting contemporary technology, such as mobile banking and digital wallets, could increase the payment network’s efficiency and reach.
Despite the effectiveness and importance of the regional payment network, it faces a number of challenges, including infrastructure limits. Some nations in the region may experience difficulties due to weak financial infrastructure, which could impede the successful utilization of a regional payment system.
Regulatory divergence may pose an additional hurdle to the regional payment network. Differences in regulatory frameworks among member states may make it difficult to develop a unified payment network. Furthermore, the Horn of Africa countries have enormous hurdles in implementing a regional payment network due to political instability and security.
Some countries in the region have been facing ongoing political and security difficulties that may have an impact on the creation and long-term viability of a regional payment network. As a result, raising user understanding and trust in the benefits and security of utilizing a new payment system will be critical to its acceptance.
However, the regional payment network has the aforementioned issues; Ethiopia is attempting to use the regional payment network through one of the country’s ways of payment methods, known as Telebirr. EthoTelecom has announced that it is in negotiations with Djibouti and Sudan to develop a regional payment network.
Ethio Telecom’s CEO Firehiwot Tamiru stated that several countries have submitted requests to form a partnership with Telebirr, and the network is said to become a reality by integrating Telebirr, Ethio Telecom’s mobile money service, with the Pan- African trade and payment system. Besides, Telebirr services and digital infrastructure are being advanced in the region.
Hence, Ethio-Telcom is working to integrate Telebirr’s which modernizes money sending and receiving to and from Sudan and Djibouti, and realize swift currency transactions using just smartphones, she noted.
Sudan’s digital payment institutions provide services at an international level, which simplifies their collaboration with Telebirr. The integration also helps to strengthen the economic ties between Ethiopia and Djibouti, she mentioned.
Telebirr, the user-friendly and secure, and reliable mobile money service, now has 54.8 million customers and has transacted 4.9 trillion Birr since its launch. Moreover, the service was a platform where Ethiopia received 19.5 million USD remittances.
Connected with 29 banks and 802 institutions to facilitate transactions, Telebirr is booming in Ethiopia’s digital financial payment. This year, Ethio Telecom has generated 162 billion Birr, including 213.5 million USD foreign currency from remittance, telecom infrastructure, and other services.
In fact, leveraging Telebirr as a regional payment network is critical for increasing the efficiency and security of cross-border transactions, lowering costs, and promoting regional economic integration.
It is also cost-effective because it speeds up payment processing and eliminates the need for intermediaries. Furthermore, these networks usually offer faster processing times for cross-border payments, which is crucial for firms that operate in multiple countries.
TeleBirr currently uses modern security methods to protect against fraud and cyber threats, guaranteeing that transactions are secure and dependable. It has a financial inclusion system because it provides affordable payment alternatives and regional payment networks that can assist in promoting financial inclusion, particularly in underprivileged areas where traditional banking services are restricted. More importantly, Tele Birr can accommodate local currencies. Once installed, the technology enables transactions in local currencies, minimizing the requirement for currency conversion and associated fees.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
Furthermore, TeleBirr has the potential to significantly improve economic connectivity and facilitate international trade. These networks help to drive economic growth and development by increasing transaction efficiency, lowering costs, and encouraging financial inclusion. As globalization continues to develop, the value of such networks will probably grow, making them crucial components of modern financial systems.
Despite the challenges that must be addressed, a successful regional payment network implementation may generally benefit the entire region and be accomplished through collaboration between governments, financial institutions, and stakeholders. Accordingly, Ethiopia’s bold move to establish a regional payment network with Sudan and Djibouti through Telebirr has great promise for enhancing trade facilitation, promoting financial inclusion, and fortifying economic cooperation.
Therefore, Ethiotelcom must continue to communicate, negotiate, and collaborate with other countries in the region in order to fulfill its objective of having a robust regional payment network in the Horn of Africa.
