The Sunday Mail
Issues of regulation and interoperability (the ability to be operated and used reciprocally) of mobile money are not peculiar to Zimbabwe as Kenya – the biggest economy in East Africa – also underwent similar teething problems.
Kenya’s Safaricom, a unit of UK mobile operator Vodafone, was arguably the first company on the continent to introduce a micro-finance institution-based loan disbursal and repayment system through M-Pesa.
After being launched in March 2007, M-Pesa grew remarkably supported by the East African country’s demographics.
By 2008, only 19 percent of Kenya’s population of 35 million population had bank accounts.
There was little incentive to established branch networks in unbanked areas because of the associated costs and tight margins associated with banking the poor.
According to studies made by the Alliance for Financial Inclusion, a private organisation, at the time of the M-Pesa application there were only 1,5 bank branches for 100 000 people and only one ATM per 100 000 people.
From its launch in 2007, M-Pesa grew to reach over five million customers in less than two years — this was already more than all of the banks combined. It naturally attracted the attention of the political establishment in Kenya, especially on the implications of allowing unregulated money transfer services.
Areas of concern that were mainly highlighted by the Central Bank of Kenya (CBK) centred on the legal status of M-Pesa. There were questions on whether the service was a banking business or not.
Authorities also probed the risks associated with the new product.
Most importantly, the CBK established in January 2007 that M-Pesa was not a banking business as defined by the Banking Act because of three important facts:
(i). Cash exchanged for electronic value are not repaid on terms and remains in control of the customer at all times. To offer M-Pesa services the agent must deposit a float of cash upfront in an M-Pesa account, held by a local bank. As such there is no credit risk to either the customer or Safaricom.
(ii). Customer funds are not on-lent in the pursuit of other business or interest income. All funds were to be maintained in a pooled trust account at a reputable bank and could not be accessed by Safaricom to fund its business.
Hence, there was no intermediation, which was a key part of the deposit taking definition.
(iii) There was to be no interest paid on customer deposits, or received by Safaricom on the float — this was a further factor which indicated that the e-value created was not in fact a deposit. But the CBK drafted a National Payment Systems Bill (NPS), which would consolidate and extend its authority over payment systems of all kinds but the Bill had low priority for Parliament and had not even entered the legislative process by late 2008.
Sub-Saharan Africa has the largest number of mobile money users in the world, with 146 million registered accounts and 69,1 million active users as of December 2014 according to GSMA Mobile Money Intelligence Unit.
