Ethiopia’s sole mobile operator, Ethio Telecom, on Tuesday launched a mobile phone-based financial service, seeking to boost growth by offering cashless transactions. Mobile financial services have become a significant part of African telecom operators’ businesses after Kenya’s Safaricom pioneered them with M-Pesa in 2007, giving people an alternative to banks.

The new service Telebirr will mark a shift for Ethiopia, where the banking system is inefficient and just 19 commercial banks serve a population of about 115 million.

State-owned Ethio said it would allow users to send and receive money, deposit or take out cash at appointed agents, pay bills to various merchants and receive cash sent from abroad.

The company plans to recruit 21 million users for the service in the first year of operations, rising to 33 million in five years, said CEO Frehiwot Tamiru. About 40-50% of Ethiopia’s annual economic output will be transacted on the platform by the end of the five years, she said.

Its launch comes as the government prepares to sell a 45% stake in Ethio, part of a broader liberalisation, including the auctioning of two new full-service licenses. But only Ethio Telecom will be able to offer mobile financial services since foreign operators are barred by law from participating.

The government had foregone $500 million in license fees by denying bidders the opportunity to roll out mobile financial services immediately, Prime Minister Abiy Ahmed said at the launch ceremony for Telebirr.

“We expect Ethio Telecom to strive in a way to compensate this,” he said, adding that mobile financial services would be opened up to competition after a year.

Telebirr will help provide formal financial services to those who do not have access to bank accounts, he said. It will also enhance security by discouraging criminals who target cash, said Mebratu Kassa, a cashier at the Lucky Cafe and Restaurant in the capital Addis Ababa.

“You sometimes don’t know if the note is counterfeit or not,” he said.

Ethio Telecom, which had revenue of 25.57 billion Ethiopian birr ($604.22 million) in the six months to the end of December 2020, has 50.7 million total subscribers.

Apart from the Ethio stake sale, ending one of the world’s last closed telecoms markets, the government is looking more broadly to open up Ethiopia’s economy.

Shares in sugar factories are also being sold and tentative steps towards opening up the financial sector have been taken.