Nairobi Star (Nairobi)
James Mbugua
23 December 2008
Nairobi — The unexpected M-PESA probe ordered last week by acting Finance minister John Michuki may have been influenced by an informal cartel of local banks unhappy with the threat posed by Safaricom's mobile money transfer service poses to their business.
According to well-placed sources, four big local banks have formed an "ad hoc committee" to try and get M-PESA stopped.
The bankers pitched their case to Michuki at dinner on Monday, 8th December. They argued that M-PESA was similar to a 'pyramid scheme' and that people could lose their money if it collapsed.
On Tuesday 11th December, speaking at the Kenya School of Monetary Studies, Michuki ordered the Central Bank of Kenya to audit the M-PESA service saying that government and even parliament had become jittery over its increasing usage and popularity.
"Pyramid schemes can use it," Michuki said. "I am not sure M-PESA is going to end up well but I stand to be corrected."
Since then, Safaricom CEO Michael Joseph has made several loaded references about the threat to M-PESA.
"I don't know who prompted it (the probe), but there are other forces who would like to see M-PESA gone," Joseph said at the launch of the '12 in 12 days' promotion last Thursday to celebrate Safaricom hitting 12 million subscribers on its network.
Joseph welcomed the probe as it would reassure his customers adding that M-PESA had complied with all the anti-money laundering and Know Your Customer requirements.
"We consulted with the Central Bank and we got their blessings on all the things that regularize M-PESA," said Joseph.
At the Safaricom Dealer of the Year awards, Joseph insisted that M-PESA would not go so long as he was CEO.
Safaricom has also been lobbying behind the scenes to ensure that M-PESA is properly understood and protected. Joseph reportedly went to the Finance minister's office the day after the probe was announced and Michuki has now reportedly moderated his position on M-PESA.
The problem for the banks seems to be the extraordinary popularity of M-PESA.
Launched in March 2007, it now has over 5,000,000 registered users and almost 5,000 registered outlets. It has transferred almost Sh60 billion since it started. In September M-PESA transferred Sh9.61 billion and in October reportedly over Sh10 billion.
Safaricom's stated revenue for SMS, Data and M-PESA in its half year accounts released last month was Sh 3.75 billion. Reportedly around Sh925 million of that was generated by the M-PESA business.
By comparison the banks only have 750 banking outlets and 3,000,000 bank accounts between them countrywide.
Some, but not all, banks are alarmed by the growing popularity of the service. They are doubly fearful of M-PESA becoming a "mobile wallet" in the future which Safaricom boss Michael Joseph has said is his dream.
According to a well informed source, the ad hoc committee has opened up the assault on M-PESA on three fronts. One is to lobby MPs to investigate the risk of a collapse; the second is to pressure CBK to insist that M-PESA be stopped until there is legislation to regulate it; while the third initiate court cases across the country by allegedly aggrieved M-PESA customers.
Safaricom insists that there is no risk of a default.
"It's not a pyramid scheme. The money is not with Safaricom, it is in a trust account managed by Commercial Bank of Africa which Safaricom cannot touch", said a representative of Safaricom who preferred not to be quoted. The M-PESA account at CBA now has a balance of close to Sh3billion.
"I don't know and I'm absolutely not aware of how any of our members would be trying to block M-PESA," said Wanyela on the phone yesterday.
"The only concern (with M-PESA) was whether we can have a level playing field", said Wanyela, Executive Director of Kenya Bankers Association.
"If they (Safaricom) are providing a financial service, they should come into the sector. If they are providing communication services they should stay in the sector so that we all play in the same field".
Another banking source said the banking industry is divided over whether M-PESA is good or bad. Some banks believe it would be better to embrace M-PESA rather than to reject it.
M-PESA was originally set up by Vodafone in the UK as a pilot project to increase financial access in developing countries. It was partly funded by DFID, the aid arm of the British government.
The Kenya model of mobile money transfer is still unique and is being closely watched around the world.
Vodafone rolled out M-PESA in Tanzania in April but the take-up has been much slower than in Kenya.
The maximum amount that can be transferred in Kenya is Sh 35,000 and the maximum that can be held in an M-PESA account is Sh 50,000. Safaricom says it does not intend to substantially increase these limits as it is providing a service for the un-banked or the under-banked.
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They can go to hell the time when they used to bribe government officials to harrass their rivals out of business are long gone. They might be the ones to close down if they are not careful. M-pesa is our innovation and it is here to stay. How about making it possible to withdraw money from ones account and send it to somebody else. Their is a huge potential in M-pesa if the banks are willing to co-operate. The next big thing which arrived after mobile phones is M-PESA. I cannot imagine how we used to live without mobile phones and now m-pesa. For the 'big' banks if m-pesa closes you will also have to close period.
The CEO's of the main banks against MPESA drive to provide financial services to the Unbanked in Kenya should use their time and resources to either embrace Mpesa into their systems or come up with a way to reach out to 58% of poor kenyans who have been locked out of their snobbish banking clubs.
Mpesa and EQUITY Bank models of banking are here to stay as long as more than the population lives below poverty line.
Think out of the box my dear snobbish friends!