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Ethiopia’s Shift from a Cash-based System to a Digital Economy Comes with its Challenges

The goal is to boost financial inclusion among its citizens, increase its tax base over time because digital transactions are easier to track, and boost economic growth overall in the continent’s second largest country by population. One way it’s doing that is by requiring digital transactions with the government, part of its first-ever National Digital Payments Strategy, published in 2021. Telebirr’s current monopoly has acquired over 31 million subscribers and facilitated more than $7 billion in transactions as of March 23. Telebirr’s dominant position has been partly achieved through advanced technology, its extensive reach, diverse use cases, and competitive pricing, said Tewodros Tassew, a local fintech consultant. That early preference for telebirr could also put other digital payment providers, especially Ethiopia’s homegrown fintech firms, at a disadvantage. Ethio Telecom wields considerable influence and can more easily overcome the country’s lengthy and complicated bureaucratic processes to integrate payment methods compared with local startups. This could handicap Ethiopia’s fintech sector and wider economic development.