True Story: An Irony of Financial Inclusion

Welcome to the latest edition of our newsletter!

For all of you fasting heroes, of the Muslim or Christian community, we hope that you’re going strong and staying out this heat🔥

But you know what you shouldn’t stay out of? ፍራንክ Digest!

As usual, we bring you your weekly brief on all things Finance and Investing. Quick, enjoyable reads in 5 minutes or less.

Here’s what’s coming your way:

• 🔏 Plot Twist: Not Everyone Has Mobile Banking? Not Everyone Has PoS Either!

• 🔢 The Credit Score: Ethiopia’s Turn?

• 🗝️ The Key Takeaways

Thanks for reading!

The Irony of Excluding the Majority in the Name of Inclusion

Banking

In typical ፍራንክ fashion, here’s a true story—adapted for informative and entertainment purposes:

You walk into an electronics store in Addis Ababa to buy a pair of headphones. Not a high-end store, not a street vendor, just a solid middle-class shop. The price tag makes you reconsider your life choices, but you’ve convinced yourself that better sound quality equals better productivity (or at least better vibes).

At checkout, you instinctively pull out your phone to make a quick mobile transfer—because, let’s be honest, even small kiosks selling ሻይ and ቆሎ accept mobile banking now. Even the parking attendant waiting for his ጉርሻ will hand out his account number when you’re out of change, and make it as convenient as possible for you.

But the cashier at this shop stops you.

“Sorry, we only accept cash or PoS transactions.”

Wait. Point-of-Sale, pay by card, PoS? That payment method that was once only available at Sheraton Addis when a foreign diplomat needed to pay for a cappuccino? The same PoS system that still requires a bank-issued debit card and a machine that isn’t exactly flooding the Ethiopian market?

Then comes the kicker: “We do this because some people don’t have mobile banking.”

Ah, yes. Financial inclusion. Because nothing says accessibility like a payment system that requires a formal bank account in a country where only 35% of adults even have one (World Bank). Meanwhile, mobile money services like Telebirr have over 51 million users, moving nearly 1 trillion birr in transactions last year alone (Reuters).

Indeed, this sounded more like financial confusion.

PoS: The Latecomer

To be fair, PoS systems aren’t new in Ethiopia, but they were never for the everyday consumer. For years, only high-end hotels, the duty-free shop in 22 Mazoria and perhaps Ethiopian Airlines even bothered with them.

It wasn’t until the last 5 years that PoS terminals started creeping into regular businesses, thanks to banks pushing ATM transactions and card payments as a “secure” and “official” digital payment method.

Even then, they’re heavily concentrated in Addis Ababa, with over 77% of PoS machines found in the capital(National Bank of Ethiopia). Meanwhile, rural Ethiopia—the majority of the country—barely sees them.

And yet, this electronics store would have you believe PoS is the go-to digital payment method, while the actual go-to—mobile banking—gets the cold shoulder.

The “Inclusivity” That Excludes Millions

The logic behind prioritizing PoS transactions over mobile banking is baffling:

1. Bank accounts are rare. Ethiopia’s formal banking penetration is one of the lowest in Africa. So requiring a debit card to make a purchase is like requiring a driver’s license for a ባለ ጋሪ.

2. PoS fees hit merchants harder. Banks charge transaction fees on PoS payments, which is why some businesses secretly prefer cash anyway—they just won’t admit it. Mobile banking, meanwhile, often has lower fees and instant transfers.

3. Smartphones aren’t the problem. If you can buy a pair of mid-range headphones in Ethiopia, chances are you have a smartphone. The actual people without smartphones aren’t shopping for tech accessories—they’re likely in the informal sector, where mobile money thrives.

Who Actually Wins?

Let’s be clear: PoS systems aren’t bad. They have their place in a modern financial system. But in Ethiopia, they’re playing second fiddle to mobile banking.

• Mobile money transactions dwarf PoS transactions. The value of peer-to-peer (P2P) mobile money transfers in 2024 was ETB 271 Billion, while PoS transactions in Ethiopia brought in around ETB 5.7 Billion over the same period (EthSwitch).

• Mobile banking is actually accessible. Even a farmer in a remote-ish area without a bank account can use mobile money like Telebirr. That’s the whole point.

• Merchants benefit more from mobile banking. Lower fees, instant transactions, and wider customer reach. But they’re still stuck in the mindset that PoS is somehow more “official.”

So this cashier’s story isn’t financial inclusion. It’s an illusion of financial inclusion.
Businesses may claim they’re catering to the financially excluded, while in reality, they’re picking a payment method that benefits them—not their customers.

Letting You Pay Your Way

If businesses genuinely care about financial inclusion, they should accept all forms of payments. Because right now, they’re making payments harder for customers while claiming to make it easier.

At the end of the day, digital payments are supposed to remove barriers, not create new ones. So if a business proudly touts that it only accepts PoS “for financial inclusion,” feel free to ask them:

“Who exactly are you including?”

Key Takeaways

1. PoS is the late bloomer, not the default. Once reserved for fancy hotels, PoS only went mainstream in the last five years. 

2. Meanwhile, mobile money services like Telebirr have 51 million users and process trillions of birr in transactions, making them the actual dominant digital payment method

3. Digital payments should remove barriers, not create them. When a business claims PoS is for “financial inclusion,” ask: “Including who?” If mobile money is already the norm, why make payments harder than they need to be? 

ፍራንክ Picks 

🚶🏽 Event: The 14th Ethio-Chamber International Trade Fair [13-17 March]

🗞️ In the news: Lion roars into the digital insurance scene with Little Ethiopia

♟️ Innovation: Addisastemari breaks the EdTech mold with custom courses

The ‘Credit Score’: An Enigma in Ethiopian Finance

Personal Finance

Have you ever had one of your friends ask to borrow money? A quick loan which they promise to pay back as soon as possible? 

After all, this is one of the predetermined friendship codes, looking out for the ones that are close to you. Because you believe, deep down, that they would do the same for you if the shoe was on the other foot. 

Friendships are built on trust and that trust can be tested when it comes to money - even fighting over a delicious Bilo’s ቦክሰኛ piece can create rifts!