In Ethiopia, only one in five people has a bank account, but half of all adults own a mobile phone. This is why mobile banking has such transformative potential.

A good example of how this can be realised is M-Birr. The start-up company began a service in 2015 that enabled five local microfinance institutions to offer mobile banking services. Their clients were now able to transfer funds between accounts and to withdraw and deposit funds at M-Birr agents, usually small retail outlets such as pharmacies, supermarkets or petrol stations. Banking services penetration in Ethiopia is extremely low. For many users, M-Birr is the first experience with banking services. By 2017, clients accessed their account via the 7 000 M-Birr agents around Ethiopia, plus the branches of microfinance institutions that served some 280 000 core clients.

Moreover, the company also processes the Ethiopian government’s social welfare payments for over 750 000 households, benefiting around three million people. The opportunity to receive social security payments by phone is making a huge difference. M-Birr clients speak of how they had to walk for hours and endure long queues to get these payments, without any guarantee that the money would be there in the end and without knowing the amount they would receive. M-Birr offers an easier, more reliable service that also creates fewer possibilities for petty corruption. To withdraw cash, beneficiaries just have to go to a local agent. The use of low-cost phones is widespread, but even those who cannot afford a phone can get a scratch card with a PIN code that enables them to claim their social payments when they visit an M-Birr agent.

The EIB is backing the next stage of M-Birr’s expansion with a EUR 4m equity investment under the Impact Financing Envelope. It is the first time the EIB has invested in mobile financial technology in Africa and is a co-investment with DEG, a subsidiary of Germany’s KfW. With the EIB investment, M-Birr plans to expand into other sectors of the Ethiopian economy, serving small businesses for which it can be costly or dangerous just to move daily revenues from one place to another in cash, as well as supporting the microfinance institutions, that deliver the M-Birr Service, in setting up more agents and branches. With the support of the EIB, M-Birr aims to spread access to the benefits of mobile money across all sectors of the economy and parts of the country.