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ArifPay, a fintech company based in Bole (Addis Ababa) Ethiopia, has raised $3.5 million (140 million ETB) in a private placement round from 31 investors. The paid capital is $1 million, while the remaining $2.5 million is subscribed capital. Investors are required to pay the subscribed money over a two-year term.
AirPay sold 140,000 shares to 31 investors, each worth 1000 ETB ($24.23). The stock was sold on the open market. However, this was a private placement rather than a public offering.
Since the National Bank of Ethiopia, the country’s apex bank, does not allow non-Ethiopian foreign citizens to invest in Ethiopia’s financial sector, all investors are Ethiopians or Ethiopian Born Foreign Nationals.
The National Bank of Ethiopia is currently processing ArifPay’s application for a Payment System Operator License (for POS and Online gateway business). By the end of May 2021, Arifpay plans to have its services up and running.
“Once operational, ArifPay aspires to make a significant contribution to the financial sector by offering digital-based payments services that meet the needs of consumers and merchants towards cash-lite transactions in line with the national agenda of the digital economy,” said Tadesse.
The fact that no foreign non-Ethiopian investors participated in ArifPay’s latest round of investment Ethiopia lies in the fact that the East African country (which is Africa’s second most populated country after Nigeria) continues to place a bar on foreigners owning stakes in banking, insurance, brokerage services, and legal consultancy businesses.
In October 2020, after a series of negotiations and deliberations, the National Bank of Ethiopia (NBE), finally granted a license to state-owned telecoms company, Ethio Telecom, to start mobile money service in the country. This followed the issuance, in April 2020 by the bank, of a regulation called Licensing & Authorization of Payment Instrument Issuers.
Founded on February 26 this year by Habtamu Tadesse, former founder of Zay Ride (which is one of the pioneer ride-hailing platforms in Ethiopia), ArifPay is a mobile point of sale system which will allow ATM cardholders to make electronic transactions via their smartphones.
M-pos and gateway-related digital financial items are among the company’s plans. Its aim is to allow people to perform financial transactions, such as payments, using their mobile phones.
“Never thought raising $3.5M in Ethiopia was possible. This is a proof that anything is possible as long as you surround yourself with visionaries who share your dream. This is a result of team work. Thank you for all shareholders and board of directors for believing in us,” said ArifPay founder and chief executive officer (CEO), Habtamu Tadesse.
For the first time in Ethiopia’s history, the regulation allowed mobile money transactions. However, there is a caveat: any company interested in the new financial service regime must set up a trust account with a deposit money bank in Ethiopia.
“As part of the application process,” the directive read, in parts, “the National Bank may request for a preliminary meeting and demonstration of the intended payment instrument to be issued, its related services, products as well as operation. Based on requests made and written approval of the National Bank, a payment instrument issuer may be allowed to provide cash-in and cash-out; local money transfers including domestic remittances, load to card or bank account, transfer to card or bank account; domestic payments including purchase from physical merchants, bill payments; over-the-counter transactions; and inward international remittances services.”
The regulation has also opened up the country’s financial services sector to include that a licensed payment instrument issuer may, with the relevant agreement with regulated financial institutions and pension funds, be allowed to provide micro-saving products; micro-credit products; micro-insurance products; or pension products in the country.
The National Bank of Ethiopia also issued, that same year, a “Licensing and Authorisation of Payment System Operators Directive (ONPS/02/2020), allowing financial technology companies (fintechs) to start off payment processing and related services in Ethiopia.
Five licenses under the payment system operator directive include National Switch, Switch Operator, ATM Operator, POS Operator, and payment gateway license.
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