CBK keeps quiet as mobile money subscribers unable to access cash for several days

Central Bank of Kenya Headquarter in Nairobi (PHOTO: FILE)

NAIROBI, KENYA: The steady growth of Kenya’s mobile money has largely been industry-led. Regulation has followed up the innovations where the legal frameworks and these rules mostly coming after the industry made major inroads into the Kenyan economy.

Despite the industry tending to maturity and playing a critical role in Kenya’s economy, regulatory agencies charged with overseeing the industry appear to be managing the industry in the same laissez-faire approach as when they were starting out.

In the past two months, subscribers to two leading mobile banking services have experienced major downtimes - making them unable to access their facilities sometimes for several days.  

Mshwari, a micro-lending solution managed by Commercial Bank of Africa and Safaricom, experienced a service interruption that started on Christmas Eve last year and persisted for an entire week.

Commercial Bank of Africa blamed the outage that affected thousands on an emergency upgrade. “On Saturday, December 23, 2017 at 4.00pm, we noted technical problems with our M-Shwari Service which resulted in our customers not being able to efficiently undertake all transactions,” explained CBA group Chief Executive Isaac Awuondo, following the interruption.

CBA said emergency maintenance works took longer than planned on account of the high rate of transactions recorded during the Christmas festivities.

“We noted that 17,700 M-Shwari customers’ who opened new Savings and Lock Savings Accounts on Friday, December 22, 2017, were assigned new account numbers, different from the ones set up when they initially opened their accounts,” explained Awuondo in a statement.

Although normal operations were restored, the Central Bank of Kenya (CBK) remained mum on the matter despite CBA’s violation of the licensing agreement.

A recently launched M-Fanisi – operated by Airtel Kenya and Maisha Microfinance Bank – has also been experiencing interruptions in the course of last week.

Not consulted

Users have publicly spoken about the distress they have been in following service interruptions, with some telling of how the Mshwari interruption messed up their Christmas plans.

One Airtel M-Fanisi customer last week explained how they were unable to take a loved one to the hospital as their money had been locked in his account.

Airtel Kenya’s social media accounts are awash with complaints from consumers unable to access their M-Fanisi facilities or witnessing irregular activities on their accounts.

The complaints, many of which are unresolved, date back to November, just a month after M-fanisi was launched.

CBK and the Communications Authority of Kenya (CA) - the two regulators that oversee the mobile money and banking systems have been silent on the recent as well as past downtimes, largely leaving the consumers to take the telco and banking giants on their own.

Last year, embattled CA Director General Francis Wagusi kicked a storm when he complained that his office had been left out of the loop in the launch of Pesalink, insisting the responsibility of regulating the platform rests with the telecoms regulator.

“Anything that is transmitted through the telecommunications systems and services requires the involvement of the authority and this (Pesalink) is something that we have not been consulted about by the Central Bank,” he said during an interview. 

Mr Wangusi (currently on suspension) said services such as Pesalink, Mshwari and Mfanisi straddle more than one sectors and require regulatory oversight from several government agencies. “We are groping in the dark at the moment because each regulator is doing its own bit separately and we are unable to collaborate for efficient delivery of this service,” he said.

As a potential solution to the regulation conflict, the CA and CBK were expected to prepare a MoU detailing the responsibility of each regulator in overseeing cross-platform services.

The document was reported to be at advanced stages of deliberations by legal departments in both agencies in April last year but so far nothing else has been heard about the same.

At about the same time the CA beat an unusual about-turn on its decision to sanction Safaricom following the April 24th network outage that saw over 28 million Safaricom consumers unable to call, send text messages or use M-Pesa for several hours.

CA had earlier inferred that Safaricom could be fined close to Sh400 million for failure to adhere to a 99.99 per cent service provision as per the firm’s licensing agreement.

Instead, the CA opted to “caution” Safaricom saying the report submitted the firm submitted explaining the downtime absolved Safaricom of fault.

Curiously, the same report has never been made public despite assurances from the regulator on the same.

Mobile money and such offshoots like mobile banking have become so pervasive to the levels that Treasury has warned that downtimes could be a technological disaster for the country.

Treasury Cabinet Secretary Henry Rotich recently reiterated that the State’s growing reliance on mobile money is exposing the government and Kenyans to risk.

“Owing to the success of mobile money, various financial products have been leveraged on this payment channel increasing interlinkages between this technology and the banking sector,” said Rotich in the 2018/2019 Budget Policy Statement published early last week.

“Given the importance of the mobile money system to the economy, its disruption would lead to substantial loss of potential government revenue, customers deposits and market confidence. The Government might, therefore, be under pressure to compensate losses and hence should be considered as a plausible fiscal risk.” Rotich said the State has increasingly turned to mobile money to receive payment for public services, transact with the private sector and collect revenue.  

Data from the CA indicates that the value of mobile money transactions has reached Sh1.6 trillion as at the end of September 2017 with 80 per cent of this through Safaricom’s M-Pesa.

A recent report by the GSMA indicated that the government has made compliance cost savings of about Sh30 billion over four years through the digitisation of public services.

“Following the migration of their services to Kenya’s eCitizen platform, the Kenyan National Transport and Safety Authority doubled its revenue collection between July 2015 and October 2016 from an average of Sh111 million to Sh203 million per month,” said the GSMA in the report. The Nairobi City County is reported to have increased revenue collection by 30 per cent from 2014 and 2015 attributed the improvement to the adoption of mobile money.

The latest warning comes barely a few weeks after Principal Secretary Kamau Thugge revealed that monies paid by Kenyans for public services through the eCitizen portal were ending up in private bank accounts as convenience fees.

Questions to both CA and CBK on action taken against the operators as well as planned interventions against the concerns expressed by Treasury went answered.