Recently National Bank of Ethiopia has issued payment instrument issuers directive No. ONPS/09/2023 for a clear reason to foster innovative payment instruments, promoting digitalization and in financial inclusion plus reducing use of cash in the economy and to fully enforce the amended national payment system proclamation number 1282/2023 art. 6.
This specific directive which is applicable from October 6, 2023 repealed and replaced the existing directives ONPS/01/2020, ONPS/03/2021 & ONPS/06/2022.
Under art. 2(24) payment instrument means, any instrument, whether tangible or intangible which is issued against the receipt of fund equivalent in Ethiopian birr, that enables a person to obtain money, goods, or services or otherwise make payments which include electronic money and cards. Further it has defined as to who is a payment instrument issuer, as a company or subsidiary or government owned enterprise licensed by the National Bank or a bank or microfinance institution authorised by NBE. Additionally proc. No. 1282/2023 art.2 (18) defined payment system operators means National Bank, financial institution or any other company licensed or authorized by the National Bank to establish and operate a payment system.
As it is provided under art. 4 of the directive, it is mandatory to get authorization from national bank to be a payment instrument issuer and financial institutions other than insurance companies , reinsurers or payment instrument operators shall submit completed application provided for this purposes to be payment instrument issuer. CBE is allowed an opportunity to participate through operation in subsidiary for the purposes of this directive.
As a mandatory requirement payment instrument issuers are obliged to score minimum paid-up capital of birr 50,000,000(fifty million birr) or equivalent in foreign currency, signed and authenticated memorandum of association, signed minutes of board of directors of the parent company etc. as it is written under art. 4(4, c) of the directive.
As per Art. 5, the payment instrument issuer company should have its own board of directors, Chief Executive officer and executive management which are subjected to mandatory approval by the National Bank. If the payment instrument issuer is government owned enterprise, the appointment of directors is based on the established guideline. As provided under Art. 6, a licensed payment instrument issuer can provide products and service such as:
- Issuance of payment instruments
- Cash-in ad cha-out at agents
- Local money transfers including domestic remittances, load to electronic money or bank account, transfer to electronic money or bank account.
- Domestic payments including purchases from merchants, bill or utility payments
- Over-the- counter transactions.
Based on written approval from NBE and outsourcing agreement with licensed financial institutions, payment instrument may facilitate the following.
- Digital saving products
- Digital credit products
- Digital insurance products
- Inward international remittances
- Pension products.
- Facilitate user to invest in government and private securities through electronic money and/or
- Facilitate payment of principal, interest/coupon, dividend or any other return derived from user investment activities.
The directive also put in place the management of electronic account, limits on transactions, dormant accounts and electronic floats.
In addition to all above requirements the payment instrument issuers are all needed to comply with utmost Customer due diligence, AML/CFT provisions and customer protections systems are needed to be as are highly regulated and supervised by the national bank of Ethiopia