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Kenya: Clear M-Pesa's Legal Hurdles
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Business Daily (Nairobi)
EDITORIAL
26 March 2008
Posted to the web 26 March 2008
Over the last one year, Safaricom has put Kenya on the map in sub-Saharan Africa for being one of the most profitable companies and globally for innovations through its mobile cash transfer service, M-Pesa.
Here is a company, which a decade ago was heading nowhere in Telkom Kenya's troubled junkyard, but today Safaricom stands tall as a symbol of promise of what can become of corporate Africa in driving economic development on the continent.
It is small wonder that the demand by both small investors and big institutions abroad wants a piece of the action in the upcoming share flotation of this company.
Vodafone, Kenya's key partner in this project, wants to commercialize Safaricom's M-Pesa service globally.
However, as we reported in our lead story yesterday, a speed bump has emerged in this journey due to regulatory issues in the United Kingdom, which mainly stems out of Kenya's inability to keep up with global standards governing financial regulations.
The UK is demanding that Safaricom meets international banking regulation requirements governing money transfers.
These requirements boil down to one, Safaricom would need a banking licence to do what it is proposing, which is an internal problem and secondly, Kenya needs to pass tougher anti-money laundering laws which have been pending in Parliament.
The stakes in this business that Safaricom is targeting are high considering that remittances to Kenya from abroad were estimated at Sh80 billion and locally, M-Pesa handled Sh9 billion in less than a year since its launch.
Globally, Vodafone want to tap into a vein that feeds into $318 billion in annual remittances and of these, $240 billion goes into Africa, Asia and Latin America.
Tapping into Vodafone's global reach to roll out M-Pesa makes a lot of sense and this is an initiative that Kenya should embrace close to its heart in two ways.
First, the banking laws must urgently reflect the fact that technology is going to be a major factor in both the national and global payment system.
So far, Central Bank of Kenya has done a good job by allowing Safaricom to launch the service, but the next step will be finding ways of integrating the M-Pesa kind of services into the national payment system in real time. This means that even commercial banks can be agents for mobile funds transfer services.
This will also call for the modernization of other payment systems such as real-time processing of cheques. Whatever technology will be required or whether a secondary class of banking licence needs to be created, this should be resolved.
The second reform is the modernization of anti-money laundering laws.
Since the United Nation's Security Council passed the resolutions asking all members states to be responsible for making it impossible for terrorists to easily transfer money in the international system in the aftermath of the 9/11 terrorist attacks, money laundering has become a watchword in the global financial transaction industry.
It is high time that Kenya came to the realization that the country will lag behind if it does not conform to global commercial laws.
This piece of legislation now ought to be reintroduced in Parliament and passed.
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As the situation stands right now, it is time we recognized that other than selling airtime, the fact is that Safaricom is more of a financial services firm by virtue of the volume of cash it now handles and the revenues it will continue to generate from this revenue stream.
Lastly, in the greater scheme of things, Kenya ought to start establishing itself as a global financial services hub and the best strategy of achieving this is enacting laws that spur innovation.
It is the only way of diversifying away from our traditional roots of generating export earnings by acting as the green grocer to the world selling vegetables, flowers, coffee and tea.
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