Understanding Ethiopia’s Digital Financial Services Framework: Distinguishing PIIs from PSOs

The year 2011 saw the issuance of National Payment System Proclamation No. 718/2011 by the Ethiopian parliament in what was a major milestone towards the creation of a legal framework related to digital financial services. In this Proclamation, NBE has given power to establish regulatory requirements for the changing environment of DSF. The separate legal regime of PSOs and PIIs then proclaimed with the enactment of Licensing and Authorization of Payment System Operators Directive No. ONPS/02/2020 and Licensing and Authorization of Payment Instrument Issuers Directive No. ONPS 01/2020. This gave birth to the non-Bank DFS service providers which were incepted by the National Payment System Proclamation after 10 years of wait. The PII directive was amended with Licensing and Authorization of Payment Instrument Issuers (Amendment) Directive No ONPS/06/2022 and then by Payment Instrument Issuers (Amendment) Directive No ONPS/09/2023. Then, both the principal and amendment Directives were repealed with the introduction of Payment Instrument Issuer Directive No ONPS/09/2023. If the PII fails to comply with any rule issued by NBE there is a Directive that dictates punishment, Penalty for Noncompliance with National Bank Directive No. ONPS/08/2022.