Businesses & Financial News

Matatu Sector: Fresh bid to enforce cashless fare payment

By Steve Umidha

The use of a cashless payment system in the matatu industry is likely to return nearly 10 years after similar plans to have PSV owners switch to electronic fare collection famously flopped.

An earlier attempt by the government in November 2014 collapsed following strong opposition from matatu operators who felt the move was a ploy to monitor their daily earnings for taxation motives.

But industry stakeholders and tech providers now say the market has matured for such innovation after mothballing the scheme for several years and whose appetite, according to them, has been resuscitated from Coronavirus pandemic experiences.

“We have been engaging directly with chairmen of matatu Saccos and the desire is there, the attitude has tremendously changed which is a departure from the chaotic noise we come across then. That time the market was not ready,” said the Matatu Operators Association Chairman Jimal Ibrahim.

Moving to a cashless era by stakeholders, according to Mr. Ibrahim will however, need the State’s backing if the idea is to succeed this time around. The market is hopeful its implementation can be undertaken by year end.

“The engagements by other stakeholders and the government have been successful but we need more authority from the ministry of Interior,” confirmed Ibrahim, who is also the Chief executive of Huduma Credit, a new financial solution offering cheap loans tailored for PSV vehicles, meant to boost such plans.

The digital payment system requires passengers to get pre-paid cards or use mobile money for payment of fares in PSV vans, but the move is still opposed by a section of operators with stickers labeled, Hakuna kulipa na M-pesa, a Swahili phrase loosely translated to mean no mobile money payments, often seen inside some matatu vehicles.

If endorsed, a digital fare collection system is expected to restore sanity in the chaotic sector and eliminate criminal cartels in the PSV market that continue to hold back such innovative decisions owing to its technical capability.

Further the move is hoped will for the first time provide the Kenya Revenue Authority (KRA) with a platform to track and trace incomes in a sector that grosses more than Sh1.02Billion daily or Sh30.6Billion every month and Sh 368 Billion annually.

The digital fare collection is also expected to eradicate employee fraud by matatu touts a move would also help vehicle owners track payments in real time.

Money collected through the PSV e-ticketing system was to be remitted in a bank, making it easier for vehicle owners to access loans through credit unions and other financial institutions offering such products at affordable rates.

“Pioneer financial solution providers such as Huduma Credit gives out loans to PSV at a cheaper rate of 5 percent compared to other lenders offering between 9 and 13 percent rate. In two years we are hopeful this platform can grow to become a bank specifically for the PSV market – a first in the market,” commented Ibrahim.

Indeed, damaging reputation against the PSV industry has seen banks and Saccos shy away from extending loans to PSV owners and often demand multiple legal requirements before flagging off such credit facilities.

A similar challenge continues to bedevil the insurance market with just a handful of insurers such as Direct line and Invesco insurance companies among others, the only notable firms actively issuing PSV indemnity covers owing to the risky nature of the business being avoided by most insurance companies.

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