Telebirr’s microloan products, such as Telebirr Mela and Endekise, are designed to provide quick financial relief. However, borrowers have reported that the associated costs can be overwhelming.
. . .
Telebirr, Ethiopia’s mobile money platform developed by Ethio Telecom, has rapidly expanded its digital microloan services since its launch in 2021. By the end of the 2024/25 fiscal year, it had disbursed over 25.8 billion Ethiopian Birr (ETB) in loans to more than 11.9 million customers. While this growth signifies increased financial inclusion, it also raises concerns about the sustainability and fairness of the system.
Telebirr’s microloan products, such as Telebirr Mela and Endekise, are designed to provide quick financial relief. However, borrowers have reported that the associated costs can be overwhelming. For instance, a 10,000 birr loan with typical fees and interest can escalate to approximately 14,000 birr over a short period, representing a 40% increase in debt. These high costs are compounded by daily interest rates up to 1.2%, monthly rates ranging from 9% to 36%, and late payment penalties as high as 2% per day. Such terms can lead to a cycle of debt, where borrowers struggle to repay their loans, potentially leading to defaults and legal actions.
In September 2025, Ethio Telecom issued legal warnings to customers with unpaid loans, invoking Law No. 1772 and classifying unpaid debts as public funds. This approach has raised concerns about the adequacy of consumer protection measures. Many borrowers, especially younger individuals, may not fully understand the long-term consequences of defaults, such as legal actions. Without proper financial literacy and awareness, users are at risk of falling into deeper financial distress.
More often than not, people who take out microloans are those who are unable to get capital through banks (due to a lack of collateral), or desperate folks trying to make ends meet. Looking at the target audience, it is hard not to see the potential for exploitation. While these lending practices are not illegal, is there even any law in Ethiopia that defines when digital lending becomes predatory?
Ethiopia’s current regulatory framework for digital lending is underdeveloped. The absence of clear guidelines for defining non-performing loans (NPLs) in digital lending portfolios poses a risk to financial stability. Traditional banking regulations, which require NPLs to be below 5% of total loans, may not be suitable for digital lenders that often operate without collateral. Additionally, the lack of integration between digital lenders and the national credit reference system increases the risk of over-indebtedness, as borrowers may take loans from multiple providers without a comprehensive credit history being available.
To mitigate these risks, there is a pressing need for transparency in loan terms and conditions. Borrowers should have access to clear information about interest rates, fees, and repayment schedules before taking out loans. Furthermore, financial literacy programs are essential to ensure that users understand the implications of borrowing and the responsibilities involved. Such initiatives can help prevent over-indebtedness and promote responsible borrowing practices.
