Mobile money transfers defy tax charge, rise to Sh1.2 trillion
The latest Central Bank of Kenya (CBK) data shows that mobile payments grew 21.8 per cent to Sh1.2 trillion at the end of August compared to Sh987.2 billion during a similar period last year. Photo/FILE
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The latest Central Bank of Kenya (CBK) data shows that mobile payments grew 21.8 per cent to Sh1.2 trillion at the end of August compared to Sh987.2 billion during a similar period last year.
The worth of mobile transactions took an upward trend in April to stand at Sh142.6 billion with August’s Sh168.1 billion figures being the highest ever in Kenya’s history.
Kenya has 23.2 million mobile money users who transact across six platforms — M-Pesa, MobiKash, Airtel Money, yuCash, Orange Money and Tangaza — backed by a network of more than 108,000 agents.
Kenyan consumers defied a new tax on mobile money to grow by a fifth the volume of cash sent through mobile platforms in the first eight months of the year.
The latest Central Bank of Kenya (CBK) data shows that mobile payments grew 21.8 per cent to Sh1.2 trillion at the end of August compared to Sh987.2 billion during a similar period last year.
This is despite an increase in fees charged to send and receive cash through mobile money following the Treasury’s February decision to introduce a 10 per cent excise duty on money transfer services.
The sustained growth of Kenya’s vibrant mobile money sector is attributed to the convenience of the solution that has broadened its traditional transfer value to include payment of utility bills such as water, rent, electricity and shopping.
“The continued growth of mobile money is largely attributed to growing ubiquity of the service,” said Bob Collymore, chief executive of Safaricom, which has 17.1 million users on the M-Pesa network.
“By broadening the universe of businesses who accept this form of payment we are seeing a greater recognition that it is quicker, easier, cheaper and safer to pay for products and services.”
Oscar Ikinu, chief executive of Mobile Pay, the operator of Tangaza Pesa, said the excise tax had minimal effect on demand for mobile money services primarily because the value of the benefits of mobile money transactions by far outweighs the extra charge.
“Mobile money service providers are continually launching new products in the market that are responsive to immediate needs of the consumers and at the same time remaining low-priced relative to the alternatives,” said Mr Ikinu in an interview.
Safaricom said agent expansion and new innovations such as M-Shwari have served to increase the accessibility and the range of functions that can be addressed by mobile money.
Safaricom increased M-Pesa tariffs by 10 per cent effective February 8, causing fears that high costs of sending and receiving money would slow down the penetration of financial services among the poorest.
A study by the banking regulator credits mobile money services for the more than doubling of Kenya’s banked population to 67 per cent this year from a low of 26.1 per cent in 2009.
Airtel money and yuCash also increased withdrawal charges for their services since they do not charge any fees to send money.
The government introduced the fresh levy after making amendments to the Customs and Excise Duty Act, bringing mobile money transfer services under the tax bracket.
The Treasury said the government plans to raise Sh2.5 billion annually from the new tax measure on mobile money transactions.
The amount of money sent in February, when the levy was implemented, declined marginally month-on-month by 1.1 per cent to Sh141.1 billion and dipped 4.7 per cent to Sh134.4 in March.
The worth of mobile transactions took an upward trend in April to stand at Sh142.6 billion with August’s Sh168.1 billion figures being the highest ever in Kenya’s history.
M-Pesa processed peer-to-peer payments valued at Sh522 billion in the six months to March 2013, Safaricom said in its latest sustainability report.
There have been concerns that the fresh levy on mobile money would dampen the performance of Kenya’s mobile money industry – considered a global pioneer and success story – which has spurred commerce and created hundreds of thousands of jobs.
Kenya has 23.2 million mobile money users who transact across six platforms — M-Pesa, MobiKash, Airtel Money, yuCash, Orange Money and Tangaza — backed by a network of more than 108,000 agents.
The value of transactions moved through mobile money platforms have ballooned almost tenfold in the past five years to reach Sh1.5 trillion in 2012 compared to Sh166.5 billion in 2008.
“The popularity of the service, coupled with its ease and convenience in use as well as facilitation of electronic payments have continued to be the main drivers behind this growth,” said Communications Commission of Kenya in its latest quarterly report.
The growth in money transfer traffic has been a boon for Safaricom which raked in Sh21.8 billion or 17.5 per cent of total revenue.
Mobile money has also been key in growing diaspora remittances, as Safaricom has partnered with Western Union to allow M-Pesa subscribers in Kenya to receive money from 45 selected countries, including the US, the UK, Canada and Germany.
The number of banks and microfinance institutions that have signed up partnerships with mobile phone providers to facilitate money transfer services for their customers increased to 17 last year compared to 13 a year earlier.
“M-banking is aimed at creating convenience to their customers and lowering service delivery costs,” said CBK Governor Njuguna Ndung’u in the 2012 Bank Supervision Annual Report.
Banks are now offering services such as transfer of funds between accounts, payments of utility bills, mobile airtime top-ups, balance enquiries, loan applications, and cheque book requests through mobile platforms.
“Through these innovations institutions enhance convenience to their customers who are able to access their services anywhere at any time at reasonable costs,” says the report.
A research note prepared by Old Mutual Securities says M-Pesa and mobile banking commissions account for a tenth of Equity Bank’s income.
Firms such as Britam, APA, Pan Africa Life, Jubilee and CIC Insurance have developed micro-insurance products that allow premiums payable in instalments via mobile money.
A pension scheme dubbed ‘Mbao Pension Plan’ was launched in Kenya in 2009 targeting informal sector workers to save at least Sh20 per day through mobile money to earn a pension.
Airtel and Pan Africa Life have a mobile-based life insurance scheme dubbed Bima Mkononi, which is a cover worth Sh25,000 and Sh100,000 at a weekly charge of between Sh15 and Sh45.
Safaricom and Britam have a comprehensive medical cover, Linda Jamii, comprising in- and out-patient cover, maternity costs and is charged Sh12,000 per family for a year.
