CBK Extends Mobile Payments Relief Until December 31, 2020

CBK Extends Mobile Payments Relief Until December 31, 2020

The Central Bank of Kenya (CBK) has extended relief measures that waive merchant fees on mobile money transfer service for transactions below Ksh1,000 until December 31, 2020.

The regulator in consultations with commercial banks and telco companies introduced the measures March 16th, 2020  to encourage cashless transactions to contain the spread of the coronavirus virus.

According to Dr Patrick Njoroge, Governor CBK, “More than 1.6 million additional customers are now using mobile money channels. However, business-related transactions have declined marginally.”

“Most of the increase was in low-value transactions of Ksh.1,000 or less—this band accounts for over 80 percent of mobile money transactions and charges were eliminated, which has helped cushion the most vulnerable households.”

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In its assessment,  CBK says the increased wallet and transaction limits that were also announced have led to increased usage at higher amounts and greater convenience.

“Against this backdrop, and pursuant to Regulation 43(2) of the National Payment System Regulations, 2014, CBK has determined that the wallet and transactions limits that were announced on March 16, 2020, will remain in force,” reads part of the statement issued Wednesday.

This means daily transaction limits will be maintained at Ksh150,000 while the daily limit for mobile money transactions raised to Ksh300,000 from Ksh140,000.

However, the extension will hit Safaricom Plc who had indicated that the initial 3 months it estimated a loss of Ksh 5.5 billion. 

The telco posted Profit after tax was 19.5 percent up translating to Ksh 73.66 billion attributed to a 4.9 percent increase in revenue and lower costs in 2019. 

Revenue from M-Pesa, grew 33.6 percent to 84.4 billion shillings driven by savings and lending and P2P which make up two-thirds of the total growth. However, M-Pesa’s revenue contracted by 32.8% for the year owing to the reduced betting activity.

“M-Pesa for example, could lose approximately Ksh 16.5Bn (19.6% of FY20 M-Pesa Revenue) based on the initial estimate of KES 5.5Bn forgone for the first three months. The banking sector which transacts 44% of all transactions via mobile channels, could also lose a big chunk of their Noninterest revenue. Although the initial agreement (mobile money relief) was deemed moral suasion, we foresee legal hurdles this time round,” comments Genghis Capital.

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The Monetary Policy Committee of the CBK meets Thursday to review the outcome of its previous policy decisions and recent economic developments, and to make a decision on the direction of the Central Bank Rate (CBR).

Analysts are of the view the MPC will retain the base lending rate at seven percent.

“On the monetary front, the Central Bank may keep rates on hold, as it struggles with excess liquidity for now. This is despite well-anchored inflation expectations thanks to lethargic credit-market induced demand slack,” said NCBA Market Research in the June monthly economic report.

“Should the MPC pursue additional rate cuts, Kenya’s financial and capital assets will become less appealing to investors on account of the lower rate of return. Consequently, the shilling will continue to depreciate on the back of increased dollar demand. As such, we believe the MPC will maintain the CBR at 7.00 percent,” Analysts at Cytonn Investments.

“We think the effect of this year’s rate cuts have fully materialized and further accommodative policy stance jeopardizes banking sector stability. Put differently, we are at or near the reversal policy rate (rate at which accommodative policy becomes counterproductive). This strengthens our view that the MPC will maintain a neutral policy stance.  Churchill Ogutu, Analyst at Genghis Capital.