Banks face contempt in cash transfer standoff

 Central Bank of Kenya

The Central Bank of Kenya in Nairobi. FILE PHOTO | NMG

Commercial banks were on Monday still waiting for a formal communication from the Central Bank of Kenya (CBK) to suspend charging customers for money transfer services to mobile money wallets in line with last week's court order.

A number of lenders, who are now facing a risk of being found in contempt of court, told customers that they will continue with the charges in the absence of CBK clarification on the matter.

The High Court on December 19, 2022, issued interim orders suspending the return of the charges from January 1, 2023.

The case is scheduled for mention on January 23 but many banks including KCB, Equity, Stanbic and I&M continued with the charges by the time of going to press.

Safaricom is also still charging for transfers from M-Pesa to banks.

The lenders told the Business Daily inquiries that they were ready to effect the changes as soon as they got the CBK communication.

“We are waiting for CBK communication on the subject matter as directed by the court,” Equity Bank responded to a Twitter user who had queried about the delay.

“The issue is still under review. We shall advise once we receive guidance from CBK,” said NCBA.

I&M Bank said it was awaiting “official guidance and communication” from the regulator in regard to the High Court ruling. Stanbic told its customers it had not received any directive from CBK.

However, banks such as Absa Bank Kenya and Standard Chartered have opted not to charge for the transactions as they wait for CBK clarification.

“We are yet to start charging until further notice from the regulator and the authorities involved based on the matter at the court,” said Absa in response to a customer.

“The bank will await communication from the CBK,” said StanChart.

KCB on the other hand remained non-committal when Business Daily reached out for a response, only indicating they would communicate to their customers if they make changes.

“We shall communicate in case of any changes. We apologise for the inconvenience,” the lender stated.

Our query to CBK remained unanswered by the time of filing the story.

The interim order was issued on December 19, last year but the transactional charges resumed on January 1 and have continued nevertheless.

“Pending the hearing and determination of this application and the petition, interim and conservatory orders do issue and be directed to the respondents, their agents or anyone authorised by them or acting under the instructions and/ or directions of the respondents, to stop, halt and/ or suspend the coming into effect of the reintroduction of charges for mobile money wallet and bank transactions as advanced by the intended 3rd respondent through its press release issued on the 6th December 2022,” reads the prayer granted by the court until January 23.

Banks were not directly involved in the case that was filed by Moses Wafula, a Nairobi resident. Safaricom and the Attorney General were listed as the first and second respondents.

CBK was listed in the case as an intended respondent alongside the Competition Authority of Kenya (CAK) and the Cabinet Secretary for National Treasury and Economic Planning.

In the case, Wafula argued that it was a contravention of the law for banks to continue riding on the M-Pesa Paybill infrastructure and making money from members of the public.

In his view, charges incurred in M-Pesa Paybill services should be paid by Safaricom’s primary clients such as banks but not by consumers.

The apex bank had earlier on December 6 given banks the nod to reinstate the charges effective January 1 this year.

The charges had been waived on March 16, 2020, as part of the emergency measures to facilitate the use of mobile money at the height of the Covid-19 pandemic.

During the period, the slashing of the fees resulted in an expansion of the payments ecosystem with CBK data indicating that the number of Kenyans actively using mobile money increased by over 6.2 million.

Before the reinstatement of the charges, banks had embarked on an aggressive lobbying spree saying they were losing millions per month due to the free transfers and that there was a competition imbalance between themselves, telecom companies and micro lenders.

In the event the order continues to be defied, Safaricom bosses as well as CBK top brass run the risk of being cited for contempt in case someone goes to court to seek the orders, an eventuality that would result in additional sanctions on the part of the offenders.

In 2020, then-Chief Justice David Maraga raised alarm over a rising trend of disobedience of court orders, stating that the behaviour was not only a violation of the Constitution but also a dereliction of duty as it put the rule of law and the dignity of courts under threat.

“Courts are temples of justice and the places of refuge for those seeking protection. They must never be despoiled either through acts of physical transgressions or blatant disregard of their pronouncements,” Mr Maraga stated.

Editor's note: An earlier version of this story stated that StanChart was charging fees for money transfer to mobile wallets. The bank has clarified that it has not been charging. 

PAYE Tax Calculator

Note: The results are not exact but very close to the actual.