M-Pesa to be listed as a bank and ‘detached’ from Safaricom

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Banks have been quietly pushing for tighter regulation of the mobile money space, arguing that lighter rules had enabled the telecommunication companies to offer services at a much cheaper rate and higher speed than they can.

If MPs have their way, the telecommunications regulator, the Communications Authority of Kenya (CA), will be compelled to ensure that mobile money services like Safaricom’s M-Pesa, Airtel Money and Telkom’s T-Kash are licensed as banks.

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The telecommunication firms will then be licensed to only offer voice, data and SMS services.

The National Assembly’s Information, Communications and Technology (ICT) committee chaired by Marakwet West MP William Kisang early this month directed the CBK to publish regulations that will see interest rates charged by more than 500 unregulated digital micro-lenders controlled by the banking sector watchdog.

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The team asked the banking regulator to ensure the digital lenders are guided by the control on cost of loans introduced in 2016 within six months of adoption of the report.

Mobile money firms and microlenders are currently allowed to skirt a legal cap on cost of loans at four percentage points above the central bank’s benchmark rate.

“The interest rates should be those applicable to commercial banks for standardisation,” the committee said in a report tabled in Parliament.

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The proliferation of lenders using mobile money technology to extend credit to the banked and unbanked alike has saddled borrowers with high interest rates.

Their entry was in response to a rise in demand for quick loans and the freeze in commercial bank lending to individuals and small business, which followed the capping of interest rates in 2016.

Mr ole Kina also wants the Senate ICT committee to issue a report on the protection of consumer data by telecommunication companies.

“The committee should explain the regulatory framework for financial transactions including loans and promotions transacted through mobile telecommunication companies,” he said.

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He also wants to know whether the interest charged on loans and other credit facilities advanced to customers by or through mobile companies adhere to the law on interest capping.

The Senate’s ICT and Budget committees will inquire into safeguards to ensure lending services by telecommunication companies do not bring down the economy in case companies collapse or shut down.

“The committee should state whether financial services being offered by the telecommunications companies can be delinked from those companies and registered as financial companies,” Mr ole Kina said.

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