National Payment System (Amendment) Proclamation No. 1282/2023

FEDERAL NEGARIT GAZETTE OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

29th Year No. 9	IN THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA
ADDIS ABABA, 3rd February, 2023	PREPARED BY THE OFFICE OF THE CLERK OF THE HOUSE OF PEOPLE'S REPRESENTATIVES

Content Proclamation No. 1282/2023 National Payment System (Amendment) Proclamation ................................. Page 14609

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Proclamation No. 1282/2023 National Payment System (Amendment) Proclamation

Considering that changes, developments, and improvements have been made in the National Payment System and it has become necessary to amend the National Payment System Proclamation No. 7/2003;

Based on Article 62(1) of the Constitution of the Federal Democratic Republic of Ethiopia, the following is proclaimed:

1. Short Title This Proclamation may be cited as the “National Payment System (Amendment) Proclamation No. 1282/2023”.

2. Amendment The National Payment System Proclamation No. 7/2003 is amended as follows:

1/ Sub-articles (4), (12), (18), and (20) of Article 2 of the Proclamation are repealed and replaced with the following new sub-articles (4), (12), (18), and (20):

“(4) “Government Document-Money Central Clearing House” means:

(a) A system that allows government document-money to be held in quality, converted into electronic content, or registered by the government, enabling the transfer of expenses and income by making entries in the register only, without the need to physically submit ownership documents for these documents;

(b) A system that allows for the clearance of ownership payments of document-money during the ownership process of government document-money, the execution of checks and transfers without physical collection, or a method or system that indicates ownership; and a system that provides other related services.”

“(12) “Financial Institution” means a bank, microfinance institution, insurance company, pension fund organization, payment instrument issuer, payment system operator, payment service provider, postal savings, or any other similar institution determined by the National Bank.”

“(18) “Payment System Operator” means the National Bank, a financial institution, or any other entity that has been granted a license or approval by the National Bank to establish and conduct a system that transmits, clears, settles, and manages the final participant account of payment transactions or government document-money.”

“(20) “Payment Instrument” means a document issued to a person to make a payment in Ethiopian Birr in exchange for money, goods, or services, and includes any electronic money card with or without payment power that enables the receipt of money, goods, or services or the execution of payment.”

2/ Following sub-article (28) of Article 2 of the Proclamation, new sub-articles (29), (30), (31), (32), (33), (34), (35), (36), and (37) are added, and sub-article (28) is renumbered as sub-article (38):

“(29) “Foreign Currency” means any currency that is legal tender in any country outside Ethiopia, other than Ethiopian currency, and is recognized by the National Bank as acceptable for payment within Ethiopia.”

“(30) “Company” means a main office registered under Ethiopian law with its principal office located within Ethiopia, as defined by the Ethiopian Commercial Code.”

“(31) “Electronic Money” means a monetary value represented as external monetary value, stored in electronic content in an electronic device or other payment execution method, physically verifiable with Ethiopia, accepted by external entities, serving as a payment execution method, and convertible into currency.”

“(32) “Foreign Citizen” means a person who is not an Ethiopian citizen.”

“(33) “Recipient” means a business association registered under Ethiopian law with its main office in Ethiopia, which is under the control of another company, payment instrument issuer, or payment system operator.”

“(34) “Payment Instrument Issuer” means a company or a government-owned organization that has been granted a license by the National Bank to issue payment instruments, or a bank or microfinance institution that has been granted approval.”

“(35) “Approval” means the procedure by which the National Bank permits a financial institution that has obtained another financial service license to additionally engage in the business sector of payment instrument issuer or payment system operator.”

“(36) “Investment Withholding Payment” means a payment made to the government by foreign citizens to engage in a business sector restricted solely to domestic owners.”

“(37) “Outsourcing” means a financial institution performing its own internal work(s) outside the institution.”

3/ Letter (b) and (c) of sub-article (1) of Article 4 of the Proclamation are repealed and replaced with the following new letter (b):

“(b) Government Document-Money Central Clearing House;”

4/ Letters (a) and (d) of sub-article (2) of Article 4 of the Proclamation are repealed and replaced with the following new letters (a) and (d):

“(a) To grant licenses or approvals to the following persons: I. Payment System Operators; and II. Payment Instrument Issuers;

d) To participants, payment instrument issuers, and operators regarding the following guidelines: I. The investment required to make payment system infrastructure developments suitable for the government and themselves; II. Expenses, on average; III. Payment for services provided; IV. Determining by guideline the amount of money held in electronic accounts, transactions conducted via electronic accounts, and the amount of raw money withdrawn from agents and other electronic devices.”

5/ Article 5 of the Proclamation is repealed and replaced with the following new Article 5:

“5. On License, Approval, and Prohibition

1/ Except for the National Bank, no person may become a payment instrument issuer or payment system operator without obtaining a bank license or approval.

2/ The Ethiopian Postal Service Organization must be subject to license, approval, and necessary supervision and monitoring work from the Ethiopian National Bank in accordance with this Proclamation for the financial service activities it performs under Council of Ministers Regulation No. 163/2011.

3/ Any payment system operator or payment instrument issuer that does not obtain prior written permission from the National Bank may not:

(a) Put a new system into operation or issue new payment instruments;

(b) Merge with another payment system operator or acquire ownership of another payment system;

(c) Commence payment system operator work or execute any agreements or terms that transfer ownership by merger or otherwise, or make any changes in the business sector;

(d) Buy back shares or reduce capital, except for normal reasons;

(e) Amend the articles of association; or

(f) Change the business name by which the payment system is conducted.

4/ The National Bank may prohibit in writing a payment system operator conducting its work or a payment instrument issuer issuing instruments under the following circumstances:

(a) If a payment system or payment instrument poses a risk to the reliability, safety, efficiency, and quality of the National Payment System; or

(b) If the prohibition is necessary to protect public interest.

5/ Payment instrument issuers or payment system operators must respect and implement the country's laws issued to prevent and control money laundering from criminal acts and terrorist financing at any time.”

6/ Article 6 of the Proclamation is repealed and replaced with the following new Article 6:

“6. On Application for License or Approval

1/ A payment instrument issuer or payment system operator must submit an application for a license to the National Bank.

2/ A bank or microfinance institution must submit an application for approval to the National Bank to issue payment instruments.

3/ A business association other than a financial institution and a government-owned organization must establish an eligible company solely for this purpose to obtain a license as a payment instrument issuer or payment system operator.

4/ The National Bank may determine the conditions for establishing an eligible company by guideline.

5/ A government-owned organization intending to engage in payment instrument issuer or payment system operator work must have a special Council of Ministers Regulation allowing it.

6/ An applicant submitting an application as a payment instrument issuer and payment system operator must meet the minimum paid-up capital determined by the National Bank.

7/ A foreign citizen may engage in the business sector of payment instrument issuer or payment system operator; or an eligible company may be established to which a license for payment instrument issuer or payment system operator is granted.

8/ Ethiopian organizations wholly owned by foreign citizenship may conduct payment instrument or payment system operator work only if the paid-up capital is entirely in foreign currency.

9/ Notwithstanding sub-article (8) of this Article, Ethiopian organizations partially owned by foreign citizenship may conduct payment instrument issuer or payment system operator work only if the amount of capital is reduced by the total share held by foreign citizenship as determined by the National Bank in its guideline, and the paid-up capital is in foreign currency.

10/ The National Bank may determine by guideline the conditions under which a payment instrument issuer or payment system operator wholly or partially owned by foreign citizenship conducts its work outside the country, as well as the relationship between the company and the recipient.

11/ An applicant submitting for a work license or approval must pay the payment determined by the National Bank guideline.

12/ Provided that sub-article (11) of this Article is observed, a foreign citizen may pay an additional investment withholding payment in foreign currency to enter the business of payment instrument or payment system operator, based on the guideline issued by the National Bank.

13/ The National Bank may verify the accuracy of the detailed information submitted by applicants, their competence to conduct the payment system, their recipients, providers, quality assurances, and any other matter deemed necessary unrelated to the application, to enable them to decide on the application.

14/ After conducting the verification mentioned in sub-article (13) of this Article, if the National Bank confirms that the submitted application is complete and complies with the provisions of this Proclamation and guidelines issued by the Bank, it grants a license or approval for the system considering the following conditions:

(a) The necessity of the system or service submitted for establishing a payment system operator or payment instrument issuer;

(b) The technical level and operational design of the known system;

(c) The detailed conditions under which the known system is managed, including security guidelines;

(d) The conditions under which money is transmitted through the system, including audit details;

(e) The applicant's financial capacity, administrative experience, and reliability;

(f) The detailed conditions of their relationship with the operator or payment instrument issuer when user interest is deemed necessary;

(g) Its impact on money and credit policy; and

(h) Other conditions deemed relevant to the National Payment System.

15/ The National Bank shall decide on the application within 60 (sixty) days from the date it receives the information requested from the applicant.

16/ The National Bank may determine by guideline the necessary information and other necessary conditions that an applicant seeking a license or approval must submit.”

7/ Following Article 26 of the Proclamation, new Articles 27 to 38 are added, and old Articles 32 to 39 are renumbered as Articles 39 to 56:

“32. On Directors and Executives of Payment Instrument Issuers and Payment System Operators

1/ Directors or chief executives of payment instrument issuers or payment system operators do not have validity unless approved in writing by the National Bank, whether at the time the work license is granted or at any other time.

2/ A director or executive of a financial institution cannot serve simultaneously as a director of a payment instrument issuer or payment system operator.

3/ Provided that sub-article (2) of this Article is observed, the National Bank may determine by guideline the manner in which directors of insurance companies or pension fund organizations serve simultaneously as directors of payment instrument issuers or payment system operators.

33. Activities of Payment Instrument Issuers and Payment System Operators

1/ The National Bank may allow financial institutions to provide micro-credit, micro-savings, micro-insurance, international money remittance, or other related services in partnership when granting a license to issue payment instruments in writing.

2/ The National Bank may determine by guideline the minimum requirements and prerequisites needed to provide the services specified in sub-article (1) of this Article.

34. Cross-Border Payments

1/ The National Bank may participate in the design of cross-border payment systems to transmit, clear, and manage payments.

2/ Provided that sub-article (1) of this Article is observed, no person may participate in the design of payment systems to transmit, clear, manage, and administer cross-border payments without obtaining the approval of the National Bank.

3/ The National Bank may issue guidelines on issues arising in relation to transmitting, clearing, managing, and administering cross-border payments.

35. On Cooperation and Joint Work with Domestic and Regulatory Institutions

The National Bank may work jointly with domestic and regulatory bodies to exchange information and conduct monitoring focused on the National Payment System to ensure the reliability and effectiveness of international payment systems. In such joint operations, confidential information must be maintained.

36. On Organizing International Payment System Principles and Operational Organization

The National Bank may organize the operational organization of appropriate international principles and operational organization of payment systems by guideline to ensure the safety, effectiveness, and reliability of the National Payment System.

37. On Renewing License

1/ Payment instrument issuers or payment system operators granted a license must renew their license annually.

2/ The National Bank determines the prerequisites for renewing licenses by guideline.

38. Implementing Provisions

The provisions of Articles 7, 8, 9, 11, 18, and 26 of the Proclamation shall be applicable to payment instrument issuers as appropriate.”

3. Time of Effectiveness of Proclamation This Proclamation shall take effect from the date it is printed and published in the Federal Negarit Gazette.

ADDIS ABABA, 3rd February, 2023

Sahle-Work Zewde President of the Federal Democratic Republic of Ethiopia

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