INDO-AFRICAN KNOWLEDGE EXCHANGE WORKSHOP March 29-30, 2012

Mobile phone access in Africa Telephone and mobile growth in Kenya MPESA growth in Kenya Mobile money Mobile money transfer Mobile phone access in Africa Telephone and mobile growth in Kenya MPESA growth in Kenya Mobile money Mobile money transfer Outline

Background African countries are generally, less developed with high unbanked populations, unemployment rates, illiteracy and poverty e.g.

Especially in Sub-saharan Africa

Number of Mobile service operators in some sub african countries

Mobile subscriber growth in sub - saharan countries

Status of financial services by mobile phone service operators in sub saharan countries

Comparing the mobile phones with alternatives Speed Convenience Safety Cost

Types of mobile phone financial services ADDITIVE MOBILE PHONE MODEL TRANSFORMATIONAL MOBILE PHONE MODEL Additive mobile phone model – Bank led – Added service to existing customers Transformational Non bank led Introduction of new entities Reaches out to the unbanked Bank Mobile Service provider

Mobile phone banking (M-Banking) Additive Access to a customers account via the mobile phone Bank Balance Inquiry Fund Transfer Bills Payment TOP-UP / Reload phone Checkbook Request List Accounts Change PIN request 11

Mobile payments/remittances Transformational 12

KENYA: RELEVANT STATISTICS 2010 Population: 40,046,566 GDP per capita: $1,600 Rural Population: 78% 13 Mobile Phone Penetration: 55.9% Source: CCK Bank Account Penetration: 22 % Source: FiinAccess 2009 Mobile Network Coverage Source: CIA Fact book, FSD Kenya

BACKGROUND A unique facet of the ICT phenomenon in Kenya has been widespread proliferation of mobile money. Starting with the M-Pesa system launched by Safaricom in 2007 and later joined by other systems, mobile money has become a fixture in the lives of Kenyans, extending a basic form of financial access to a wide population. The mobile phone financial service plays a dominant role in rural areas, with important vertical integration consequences for existing financial service providers, including micro-finance institutions and SACCOS. There has been vertical integration with mobile phone financial services and commercial banks. Case for MPesa

15  In line with Kenya’s payment system modernization efforts, mobile payment services including M-Pesa, Airtel, and Yu are within the mandate of the Central Bank of Kenya as set out under Section 4A 1(d) of the Central Bank of Kenya Act which is to formulate and implement such policies as to best promote the establishment, regulation and supervision of efficient and effective payment, clearing and settlement systems.  Regulatory challenges that have continuously been addressed include;  In line with Kenya’s payment system modernization efforts, mobile payment services including M-Pesa, Airtel, and Yu are within the mandate of the Central Bank of Kenya as set out under Section 4A 1(d) of the Central Bank of Kenya Act which is to formulate and implement such policies as to best promote the establishment, regulation and supervision of efficient and effective payment, clearing and settlement systems.  Regulatory challenges that have continuously been addressed include; Stability. Efficiency. Competition. AML/CFT issues. Legislation. Access. Modernization

16 As at DECEMBER 2011 Safaricom million customers. Airtel 3.16 million customers. Yu 0.52 million customers. Orange 0.13 million customers Tangaza 0.07 million customers Mobikash 0.11 million customers Mobile Money Transfer Industry in Kenya Overview

17 Mobile Phone Financial Services in Kenya Volumes & Values Source :Central Bank of Kenya, 2011

18 Mobile Money Transfer Industry Overview

KENYA’S PAYMENT SYSTEM STRUCTURE 19 Like any other financial system, Kenya’s Payment System is divided into the Wholesale and retail payment segment  Wholesale- High values & Time critical  Retail-Low value & High volumes  Best measure of risk concentration is value

From coins to paper to electronic M-PESA

RELATIVE IMPORTANCE OF VARIOUS PAYMENT SYSTEMS 21 Retail payment systems Wholesale payment systems

Enabling Environment

23 Policy Framework E- commerce AML-CFTBank Agency Payment systems Bank outsourcing Comp- etition Telco regulation EE: MOBILE PAYMENTS & MOBILE BANKING 23

Enabling Environment: Policy Balance Stability of the financial system Efficiency Broader access Financial integrity Financial integrity Consumer protection & choice Consumer protection & choice 24

What is the role of the private sector? What is the role of the Government? What is the role of the central bank? 25

Possible roles for policy makers Regulator Supervisor Standard setter Information gatherer Facilitator Coordinator 26

What is the next innovation? 27

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THANK YOU Questions