Central Bank of Kenya has issued guidelines allowing larger transfers for the mobile money industry as it emerged that operators transacted an unprecedented Sh76 billion last December. The draft guidelines for mobile and other electronic money issuance and transfer services are meant to protect consumers and provide minimum standards of operations in the e-money sector.

The rules propose that retail transfers be capped at Sh100,000, giving room for all providers to review their limits upwards once the draft becomes law. Industry players are slated to review the draft before they are considered for gazettement.

Currently, the highest amount being transferred in a single transaction is Sh70,000 by Safaricom, which reviewed the limits recently.
Other mobile money transfer agents have capped single cash transactions at Sh35,000.

Issuers of e-money, which include money transfers and plastic cards as well as online payments, are now supposed to disclose certain information in writing to new e-money account holders including: The fact that their cash can be redeemed, fees applicable, that funds put in cannot earn interest and that it is not a savings account or other investment instrument.

The amount put in the e-money transfer account is not protected under the Deposit Protection Fund, the way bank accounts are.That effectively means that if an e-money issuing firm collapses with a customer’s deposits there is no recourse. In turn, this is likely to keep the amount of deposits with money transfer providers low.

The rules provide for appointment of agents by e-money issuers and registration of such agents. They also provide the rules of engagement.
Said Central Bank of Kenya governor Njuguna Ndung’u: “The mobile money transfers has in the last few years demonstrated how financial services can be provided to a large number with least cost using appropriate technological platforms”.

Speaking at the Kenya School of Monetary Studies in Nairobi, Prof Ndung’u noted that in only four years of existence of mobile phone money transfer services, four mobile phone operators have launched the services and have enrolled over 15.4 million customers and recruited over 39,000 agents.Total transactions have now reached Sh2.45 billion a day and Sh76 billion a month as at December 2010.

“This has created many opportunities for Kenyans and including employment, access to financial services and an effective tool for channelling currency to the banking systems,” said Prof Ndung’u. The draft rules say that a payment service provider, who is not a licensed bank or an authorised e-money issuer, must have a minimum of Sh10 million in core capital.

However, it must also maintain an amount equal to one per cent of one-twelfth of the previous year’s total transaction value.
For all the providers, the total core capital on the basis of annualised transactions for December 2010 would means that Sh7.56 billion would be maintained as core capital.

The core capital has been defined clearly to avoid a situation where a provider arbitrarily uses such manoeuvres as goodwill to ensure meeting requirements without having tangible capital.Core capital is defined as the shareholder’s funds in the form of fully-paid shares and disclosed reserves less goodwill or any other intangible assets. (Nation)