CBK faces protest over free money transfers

Telecommunication companies and banks have protested the Central Bank of Kenya’s move to extend the free mobile money transaction fees without consulting them.

The firms said that CBK should have sought their opinion before unilaterally extending various relief measures on mobile phone payments by a further six months, which will see banks and telcos like Safaricom #ticker:SCOM lose billions of shillings.

Executives at the firms, who did not want to come on record, said that CBK should have extended the free service for a shorter period or introduced discounts on the transfer charges to cushion the organisations from losses.

“We were not consulted given the billions we stand to lose,” said a top Safaricom executive who sought anonymity for fear of CBK reprisals.

“We should have gone the Rwanda way or at least extended for a short period.’’

CBK introduced the measures to encourage cashless payments on mobile phones because the government said avoiding the physical use of cash would help contain the spread of the virus in the country.

Under the CBK directive, mobile phone money transaction fees under Sh1,000 are free with banks removing charges for customers moving cash between their mobile wallets and bank accounts.

Safaricom had earlier said that the free M-Pesa service had seen it lose an average of Sh1.8 billion monthly since mid-March, a pointer that it could miss sales of up to Sh16.2 billion in the nine months to December.

The Sh16.2 billion is equivalent to about a fifth or 19.1 percent of M-Pesa’s annual sales, underlining the impact of the pandemic on Safaricom’s earnings.

Safaricom declined to issue an official comment over the extension.

At least six bank executives told the Business Daily that they had no prior knowledge of CBK’s directive, arguing that the free service was a moral appeal and not a legal order.

Through their lobby group — the Kenya Bankers Association (KBA) — the banks had planned for their members to decide on the fate of the free cash transfer ahead of the CBK order.

“CBK issued the directive without consulting anyone and did not even have the courtesy of acknowledging that banks have played a huge role in the initiative,” said one executive.

Kenya has so far reported 5,384 positive cases of Covid-19. It reported its first case on March 12.

KBA chairman and KCB #ticker:KCB chief executive, Joshua Oigara, said the bankers will meet with CBK Governor Patrick Njoroge Friday, but refused to comment on whether he was consulted ahead of the order. “We do not comment on matters of the Central Bank, it has made a directive and we have a meeting with the governor tomorrow after the MPC (Monetary Policy Committee) meeting,” Mr Oigara said.

CBK had quoted regulation 43 (2) of the National Payment System when it extended the cash transfer relief.

The section refers to caps placed on mobile phone cash transfer like the increase of the daily transaction limit to Sh300,000 per person from the initial Sh140,000.

Mobile financial services users are also able to hold more money in their wallets and the total monthly limit for transactions was also removed.

The various limits were originally introduced to stem cases of money laundering and the CBK has said it has increased its surveillance after their removal to ensure compliance.

Safaricom said it would take a Sh5.5 billion hit on its M-Pesa revenue in the three months from mid-March after it waived transaction fees on mobile money transfers under Sh1,000. In the financial year that ended in March, M-Pesa accounted for about a third of Safaricom’s Sh251.2 billion revenue. Safaricom’s share has shed 6.3 percent since Monday on what analysts’ link to uncertainties over the M-Pesa earnings.