A country floating its currency has an impact on startups.
Take SantimPay Financial Solutions, an Ethiopian fintech.
Here's how the company's CEO, Tensaye Desalegn, explains what impact recent economic reforms have had:
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In 2018, Ethiopia got a new prime minister in the person of Abiy Ahmed. One of his government’s priorities has been the country’s digitalization.
This newfound, governmental tech impetus coincided nicely with Santimpay’s launch. It helped us takeoff, regulatory-wise especially.
Until recently, Ethiopia’s economy was less liberal than many of its African counterparts. A lot of state-owned companies and heavy regulations, in short. Some landmark decisions point to a paradigm shift.
One has been the opening up of the state telecom operator, Ethiotelecom, to foreign investors.Another, more Santimpay-relevant change has been the floating of Ethiopia’s currency, the birr. The birr’s exchange rate was previously set by the government.
This led to parallel rates on the black market, which valued the birr less than the government did. This made it hard for remittance companies to operate: they had to use the government’s rate, which was unattractive.
Now, the market sets the rate of the birr. This is a boon for remittance companies, who can offer better rates. Remittances are a vertical we want to exploit, so this policy change is momentous for us.
The birr’s floating came as a part of a wider package of FX-related reforms. These include facilitating money flows in and out of the country.
This makes the Ethiopian startup ecosystem more enticing: foreign investors are wary of markets in which repatriating their profits is hard.
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Read Tensaye's full Realistic Optimist interview here: https://lnkd.in/g-mDSZSE