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By Steve UMIDHA
Exorbitant mobile money transaction charges and higher bank interest rates appear to have done little to soften the resolve of more than half of Kenyan adults who still prefer transacting via their mobile phones to carrying cash.
Not only do they favor e-money services which rose this year with the passage of the controversial Finance (2023) Bill in June, from 12% to 15%, four years after it was increased from 10% to 12% – but they also say overblown charges by telcos’ bluster, will not change the fact that ‘cash is checking out.’
The new rates, depending on who you ask, are already affecting prices of basic commodities, as the operators pass the burden to customers.
Mobile money subscriptions stood at 38.1 million, representing a penetration rate of 75.2 percent, according to the latest data by the Communications Authority of Kenya (CA) in its first quarter sector statistics report for the financial year 2023/24.
Similarly, the report shows that the period under review (July, August September 2023), the total number of mobile phones accessing mobile networks stood at 64.67million out of which 32.63 million and 32.04 million were smartphones and feature phones respectively.
Meaning, feature phones, commonly denoted as ‘kabambe’ phones, are still the preferred mobile devices among Kenyans, cementing their dominance in the local handset market despite the popularity of smartphones – and are still heavily used to transact digital money.
Mobile money is a way to store and manage money in an account linked to a mobile phone, similar to a bank account. Mobile money users can send money to other people, pay bills, and purchase many things, including mobile airtime. Airtime (also known as mobile recharge) is used to make phone calls, send SMS, or use data.
Such payments system is based on accounts held by a mobile operator and accessible from subscribers’ mobile phones, and the conversion of cash into electronic value (and vice versa) happens at retail stores (or agents). All transactions are authorized and recorded in real-time using SMS.
The invention of mobile money services has led to the transformation of the lives of many Africans but taxation policies remain a drawback to the financial inclusion gains made by these innovations.
Many African countries have banked on the digital economy after the Covid-19 pandemic struck and paralyze many economic activities.
Various governments, including Kenya and Tanzania, have not only embraced digital transformation but also provided sound and enabling policy frameworks over the years to allow for innovative solutions that empower citizens.
For instance, mobile money platforms such as M-PESA have been vital drivers of financial inclusion on the continent.
However, government tax policies pose a significant challenge to the sustainability of mobile money services and the financial inclusion gains made by these innovations.
Vodacom Group’s policy paper on Mobile Money Taxation outlines that accessibility and affordability are two of the major drawcards of mobile money on the continent, giving people access to the most basic financial services.
M-PESA, the first and most successful mobile money payment service on the continent with 52 million subscribers, is currently available in Kenya, Tanzania, Lesotho, the DRC, Ghana, and Mozambique with plans to make it available in Ethiopia.