Telebirr as a Financial Broker: Paving the Way or Posing Risks?

Addis Ababa, Ethiopia – Ethio telecom, Ethiopia’s largest telecommunications provider, recently announced a groundbreaking initiative to sell 10% of its shares via Telebirr, its mobile money platform. This ambitious move marks a significant step towards the long-anticipated privatization of the state-owned telecom giant. While the decision has generated excitement and optimism, experts caution that serious challenges lie ahead—challenges that, if not addressed, could impede the success of this unique approach.

Approved by the Ethiopian Capital Market Authority (ECMA), Ethio telecom’s plan to utilize Telebirr as the platform for its share sale aims to democratize investment, making it accessible to millions of Ethiopians. The idea is to capitalize on the widespread use of mobile money services across the country. However, beneath the enthusiasm, concerns are growing regarding transparency, security, and the preparedness of Ethiopia’s financial infrastructure to handle such an unprecedented move.

Telebirr as a Financial Broker: Paving the Way or Posing Risks?

The use of Telebirr as a platform for share trading is a novel idea in Ethiopia’s financial market. By leveraging its vast user base, Telebirr could open the door for ordinary citizens, allowing them to buy shares easily using their mobile phones. But according to Dr. Abush Ayalew, a prominent Ethiopian stock market expert and founder of Adwa Finance, this approach brings significant risks.

Dr. Ayalew explains, “This move could potentially democratize access to investment in a way we haven’t seen before, but it also introduces several challenges that cannot be ignored. The ECMA must act quickly to ensure that safeguards are in place to protect investors.”

He adds that the rapid adoption of Telebirr for mobile money transactions may not automatically translate into successful stock market participation, especially for first-time investors. “Many Telebirr users have never engaged in stock trading before,” Dr. Ayalew notes. “Without proper financial education, this could lead to misguided decisions, and in the worst cases, financial losses.”

The Lessons from M-Pesa and M-Akiba: A Cautionary Tale

Dr. Ayalew draws comparisons between Ethio telecom’s Telebirr share sale and the failed attempt by Kenya’s M-Pesa to venture into stock trading. M-Pesa, Kenya’s mobile money platform, was highly successful in revolutionizing mobile payments. In 2017, its parent company, Safaricom, attempted to introduce a stock trading service through M-Akiba, a mobile-based platform for purchasing government bonds. However, the initiative faced insurmountable challenges.

“M-Akiba was expected to be a game-changer in Kenya, but it ultimately struggled for several reasons,” Dr. Ayalew explains. “One of the biggest hurdles was the lack of investor awareness and financial literacy. Most M-Pesa users were familiar with mobile payments but had little to no understanding of stock trading. As a result, they were hesitant to participate.”

In addition to the educational gap, M-Akiba encountered technical issues. Frequent glitches and downtime frustrated users and discouraged further engagement. The platform’s limited product offerings—focusing only on government bonds—also failed to attract a wider audience. “Despite the initial excitement, M-Akiba was eventually discontinued. It was a valuable lesson in how technology, education, and diverse investment options must work together for such initiatives to succeed,” Dr. Ayalew points out.

The parallels between M-Pesa’s M-Akiba and Ethio telecom’s Telebirr initiative are clear. If the Ethiopian stock market hopes to flourish, Ethio telecom and the ECMA must learn from these past mistakes, particularly in areas like investor education, platform stability, and product diversity.

Transparency and Security: The Pillars of Trust

One of the primary concerns surrounding Ethio telecom’s share sale via Telebirr is transparency. Dr. Ayalew warns that without clear guidelines and transparent practices, the entire initiative could be at risk of losing investor confidence.

“How will Ethio telecom determine the share price? What methods are being used to ensure the price is fair and not artificially inflated?” Dr. Ayalew asks. “If the process lacks transparency, we could see manipulation or a misrepresentation of the company’s value, which could result in dissatisfied or misled investors.”

Beyond pricing, transparency is also essential in providing investors with easy access to information. “Investors need to know the full picture—Ethio telecom’s financial performance, growth strategies, and potential risks,” Dr. Ayalew emphasizes. “Telebirr must ensure that this information is readily available to all investors, not just a select few.”

Security is another major concern. Telebirr handles millions of financial transactions daily, but introducing share trading adds another layer of complexity. Dr. Ayalew raises questions about whether the platform is equipped to manage this new function while ensuring data privacy and transaction security.

“Telebirr must implement rigorous cybersecurity measures to protect sensitive investor data,” he insists. “Equally important is ensuring that the platform can handle a surge in transactions without crashing. Any technical failure during the share sale could have severe consequences, both financially and reputationally.”

Investor Protection and Education: Crucial for Long-Term Success

Dr. Ayalew also highlights the need for strong investor protection mechanisms. As many Telebirr users will be first-time investors, they will need clear guidelines and recourse options should they encounter disputes or financial loss.

“Dispute resolution mechanisms must be simple, accessible, and fair,” he advises. “Investors need to feel that they are protected, whether from technical glitches or market volatility.”

But perhaps the most critical factor in determining the success of Telebirr’s share sale is investor education. Without adequate knowledge about stock trading, many first-time investors may find themselves overwhelmed or, worse, may treat the stock market like gambling.

“Financial education is non-negotiable,” Dr. Ayalew stresses. “If Telebirr users are not well-informed, this initiative could backfire, leading to significant financial losses for many inexperienced investors. The ECMA and Ethio telecom must invest in educational campaigns that explain the risks and rewards of stock market participation.”

The ECMA’s Role in Safeguarding Market Integrity

The Ethiopian Capital Market Authority will play a central role in the success or failure of Ethio telecom’s share sale. Dr. Ayalew believes that proactive regulation, oversight, and investor education will be crucial.

“The ECMA must not only monitor Telebirr’s operations but also establish clear rules to ensure transparency, security, and investor protection,” he states. “By doing so, the ECMA can pave the way for a more inclusive and robust stock market in Ethiopia.”

Conclusion: Bold Yet Cautious Optimism

Ethio telecom’s decision to sell shares through Telebirr is a bold and innovative move that could open up Ethiopia’s stock market to millions of new investors. However, as Dr. Ayalew emphasizes, the success of this initiative hinges on transparency, security, robust technology, and comprehensive investor education.

The story of M-Akiba in Kenya serves as a powerful reminder that mobile-based stock trading platforms must be built on solid foundations. By learning from the past and addressing these critical challenges, Ethiopia could be on the cusp of a financial revolution—one that truly democratizes investment and fosters long-term economic growth

About the Expert:

Dr. Abush Ayalew, graduated from Lincoln University with MBA Finance, is a renowned financial expert and a leading voice in Ethiopia's capital market development. With extensive experience in global stock trading and a passion for financial literacy, Dr. Ayalew is dedicated to empowering Ethiopians to achieve their financial goals.

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