Eritrea's financial system has long been dominated by state control and traditional banking services, which are limited in scope. However, the slow but steady rise of digital technologies in the region is opening the door to new payment methods that could revolutionise how people manage their finances. From mobile money to the gradual introduction of fintech services, the financial landscape in Eritrea is evolving.
The State of the Banking Industry in Eritrea
Eritrea's banking sector remains underdeveloped, largely controlled by the state, with only a few banks operating under tight restrictions. Formal banking services are inaccessible to a significant portion of the population, with the unbanked population estimated to be above 70%. Limited access to international financial markets, along with sanctions and capital controls, have made it difficult for the banking industry to modernise or adopt new technologies.
The Emergence of New Payment Methods
Despite these challenges, there are signs of change. The proliferation of mobile phones and increasing connectivity, albeit slow, is providing new opportunities for payment innovations. In neighbouring countries like Ethiopia, mobile money services have expanded financial access, and Eritrea could follow a similar path. Although mobile payment platforms like M-Pesa are not yet present in Eritrea, the success of mobile banking in East Africa suggests that similar systems could eventually emerge in Eritrea as internet and mobile penetration increase.
Fintech companies are also exploring ways to circumvent traditional banking systems by offering peer-to-peer lending, remittance services, and digital wallets. Eritreans in the diaspora are increasingly using cryptocurrencies and mobile payment services to send money back home, bypassing high remittance fees.
The Role of Fintech and Neobanks
Fintech in Eritrea is still in its infancy, but the potential for growth is evident. With the right infrastructure, fintech platforms could help increase financial inclusion, particularly for the unbanked population. Digital wallets, mobile money, and peer-to-peer platforms have already proven successful in other African nations. In Eritrea, these services could provide a lifeline for small businesses and individuals with limited access to formal banking.
Neobanks, which offer digital-only banking services, are still largely unheard of in Eritrea, but as more people gain access to the internet, this could change. Neobanks offer the ability to manage accounts, make transactions, and access financial services entirely online, which would be a game-changer for a country where traditional banks are hard to access.
Payment Methods Shaping the Future of Finance in Eritrea
New payment methods have the potential to drastically improve Eritrea's financial landscape. Digital payment platforms could enable faster, cheaper transactions, especially for international remittances, which are a critical source of income for many Eritreans. Mobile banking and fintech solutions could also help bridge the gap in financial access for the unbanked population, offering tools for savings, payments, and small-scale lending.
As digital infrastructure improves and new players enter the market, the future of financial access in Eritrea looks promising. However, the rate of change will depend on several factors, including internet expansion and the easing of regulatory and state controls over the financial system.