M-Pesa users will now send and receive money from one of Kenya’s biggest trade partners Uganda after Safaricom partnered with MTN, a mobile phone service provider in the neighbouring country.
The M-Pesa International Money Transfer partnership with MTN is the third cross-border deal within the East African region.
It is expected to boost trade and ease mobile money transfers for businessmen, friends and relatives across the borders.
High demand for M-Pesa in Uganda has seen un-authorised usage of the service for years driven mainly by the high Kenyan student population and traders operating from Kampala and other towns in the country.
Safaricom has more than 22 million M-Pesa users while about five million MTN customers use mobile money in Africa.
Safaricom’s director of financial services Betty Mwangi said the partnership gives individuals and businesses a more reliable form of money transfer “complementing the economic initiatives spearheaded by the East African Community heads of State.”
Diaspora remittances have become a new battlefront in the financial services sector where transaction commissions have become big revenue earners for commercial banks and mobile money operators.
The cost of international remittances through traditional channels like banks or money transfer operators can be up to 31 per cent of the transaction, depending on the service provider.
In the past year Safaricom has been on an expansion plan for M-Pesa across the region, after the Central Bank of Kenya (CBK) awarded it a cash remittance operating licence last year, enabling it to carry out money transfers out of the country.
Before licensing the telco was not allowed to handle outward cash transmission even to neighbouring Uganda or Tanzania and had been offering one-sided international cash transfer services moving money into Kenya through partners such as Western Union and MoneyGram.
The large population of Kenyan students who depend on remittances from their parents or guardians provide a big base for Safaricom to grow its business in the country.
Safaricom signed a similar international money transfer deal with Vodacom in Tanzania in March and Rwanda’s MTN in October this year.
Under the agreement with Vodacom, Safaricom subscribers sending money to Vodacom’s M-Pesa network would be charged one per cent of the value of transaction plus an exchange rate fee. The same will also apply to Vodacom M-Pesa clients.
Safaricom’s signing of deals with individual country mobile operators comes months after British telecommunications giant Vodafone, which owns 40 per cent stake in Safaricom, signed a deal with South African telecommunications company MTN to have their respective mobile money customers transfer money to one another across the seven Eastern African countries.
To access the service, customers will be required to dial *840# and follow the prompts. The funds will be sent in Kenyan shillings and received in Ugandan shillings, based on the prevailing exchange rate as at midnight.
“Our subscribers will be able to cash out the remittances at any of our 55,000 agents across the country,” said Phrase Lubega, general manager, the MFS for MTN Uganda.