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

Tue Oct 21 10:32:53 EAT 2008

Hi Jothan,

Banks in Kenya have long frutstrated e-commerce because it makes them
lose the "central" transactions role. In that old world, banks ruled!
recall <http://www.relfe.com/plus_5_.html>.

Kenyan M-PESA innovation (hata ikiitwa ni ya nani?) has caused global
ripples "Big Banks Crush Mobile Innovation in Bangladesh"
<http://el-oso.net/blog/archives/2008/08/28/big-banks-crush-mobile-innovation-in-bangladesh/en/>

What the future?
1. To be on high alert in ensuring super mobicoms do not crush newer
innovations..
2. Banks embrace e-commerce else they perish completely into
irrelevance history
3. There's evidence Kenyan officials are opposite of Bangladeshi
bank-protectionists:)

Alex

On Tue, Oct 21, 2008 at 9:41 AM, Jotham Kilimo <jokilimo at yahoo.com> wrote:
> Hi,
>
> I think the banks should not go for regulation as a way of checking the
> mobile phone money transfers. They should instead see how they can partner
> with the mobile phone operators in delivering a secure service to the
> majority of the people (potential bank customers). The banks could offer the
> banking services and the mobile phone operators provide the platform.
>
> This is not the first non-bank money transfer service in the country. There
> was the now obsolete Telegraphic Money Order (TMO), which the banks did not
> challenge as it is doing now. The difference is that the M-Pesa and Sokotele
> are using a device (mobile phone) that is conveniently in the reach of
> millions of citizens, hence the fast growth. But the needs driving this
> service are the same ones during the days of the TMO; mostly sending money
> to rural folks and small business transactions.
>
> Jotham K. Mwale
>
> --- On Sun, 10/19/08, aki <aki275 at googlemail.com> wrote:
>
> From: aki <aki275 at googlemail.com>
> Subject: Re: [kictanet] Kenya's Banks ask for regulation on Mobile Money
> Transfers
> To: jokilimo at yahoo.com
> Cc: "KICTAnet ICT Policy Discussions" <kictanet at lists.kictanet.or.ke>
> Date: Sunday, October 19, 2008, 1:29 AM
>
> Here's an article from the net : Big Banks crush Mobile Innovation in
> Bangladesh ?:
>
> "Banks, the traditional leader in payment systems, see mobile banking as a
> new threat if private telecom operators are allowed to use their outlets for
> money transfer without law," writes journalist Sajjadur Rahman. I don't know
> what he means by "without law", but I do know what's behind this quote by a
> government official: "We won't let anything, which hurts the banking
> industry, happen."
> It is a classic example of powerful lobbyists delaying a new technology to
> protect their industry interests. Mobile banking allows any mobile phone
> customer to deposit money into his or her phone account at any mobile phone
> outlet (which are everywhere in countries like Bangladesh) and transfer that
> money to any other mobile phone user. M-PESA in Kenya has shown how this can
> bring basic banking services to millions of rural residents who would
> otherwise never open a traditional bank account.
> Mahmud Sattar, president of the Association of Banks of Bangladesh, offered
> this line to the Daily Star: "We have given our opinions at the meeting and
> told the central bank that banks have no objection to using modern
> technology as a tool of expanding delivery channels."
> The problem is that banks aren't in the position to introduce mobile banking
> whereas phone companies are. If mobile banking services are not introduced,
> it is the rural poor who are denied the services.
> Just ten days ago Mark Pickens wrote an article at CGAP, which says that
> traditional banks in Kenya are irked that Safaricom is able to operate its
> M-PESA mobile banking service with so few regulations in place. With 2.7
> million clients, it may be that M-PESA became too successful too fast and,
> having learned their lessons, banks in other developing countries won't
> allow mobile phone companies to dig into such a large market share.
> http://www.thedailystar.net/story.php?nid=52017
>
> http://technology.cgap.org/2008/08/18/should-banks-play-offense-or-defense-with-the-poor/
>
>
>
>
>
>
> On Sat, Oct 18, 2008 at 1:21 PM, alice <alice at apc.org> wrote:
>>
>>        (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"
>>
>>
>>
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