[kictanet] Kenya’s Banks ask for regulation on Mobile Money Transfers

[alice]

        (From Balancing Act)



        Kenya’s Banks ask for regulation on Mobile Money Transfers

The banking fraternity is crying foul over what it described as unfair 
and increasing competition from money transfer operators. The industry 
says the operators are enjoying privileges similar to those extended to 
deposit taking institutions despite not being covered by the same 
regulatory regime.

"Currently, there is no legal framework within which these entities 
provide their services despite behaving like current account 
institutions," says John Wanyela, executive director of the Kenya 
Bankers Association. "If these operators want to join the financial 
sector, they have to be properly licensed."

The bankers are calling on the government to subject the services to 
prudential regulations "for robust and secure movement of funds across 
the economy." Under the proposed guideline, the services will have to be 
supervised by a specialised financial regulatory authority that will 
oversee their financial soundness and stability.

Currently, the two leading mobile phone service providers - Zain and 
Safaricom - are offering money-transfer services in the country under 
Sokotele and M-Pesa brands respectively. Like other deposit takers, the 
bankers association wants the mobile cash transfer operators restricted 
on how much deposits they can take.

To avert undue competition with the banking fraternity, Wanyela says, 
M-Pesa and Sokotele services have to meet the capitalisation requirement 
as stipulated in the Banking Act. According to the Act, a deposit taking 
institution should maintain a minimum capitalisation of Ksh250 million 
($3.5 million).

This is however expected to double come December next year before 
hitting Ksh1 billion ($14.2 million) by 2010 after capitalisation 
requirements were amended in this financial year's budget. The bankers 
also say the "digital money" has implications for the conduct of 
monetary policy by the Central Bank of Kenya.

To control inflation levels in the country, CBK continuously monitors 
the amount of money in circulation, mainly in the hands of people and 
commercial banks. With the monies in circulation, CBK is in a position 
to maintain a reserve money target and, therefore, intervene to control 
inflation. Observers say it is this huge amount of money circulating 
electronically that has defeated CBK in the fight against inflation.

Wanyela says it is time the government stepped in to ensure M-Pesa and 
Sokotele services are regulated before "something goes wrong." Debate 
has been rife on who should regulate the mobile phone money transfer 
operators, with some arguing that the CBK should be party to the 
issuance of guidelines as "part of M-Pesa and Sokotele services fall 
under the national payments system."

Fundamentally, the two mobile operations are guided by the 
Communications Commission of Kenya. Early last month, CBK said it had no 
intention of bringing the mobile cash transfer services under the 
Banking Act.

It claimed that treating the money transfer services under the Act may 
impede competition in sector that is still at its infancy in a country 
whose majority population has limited access to financial services.


Safaricom statistics show that as at the end of the first quarter of 
this year, more than Ksh3.1 billion ($44.2 million) had been 
transferred. From its launch in March 2007 till May this year, the 
service has facilitated the transfer of more than Ksh23.77 billion 
($339.5 million).
(Source: The East African)

For further information on mobile payments in Africa purchase Balancing 
Act’s report  “M-Money - Finances, Banking and Payments through mobile 
phones”