Millions of Kenyans using M-Pesa and other mobile money services could be earning interest on their deposits were it not for a 2014 law that blocked it, making Kenyans the only ones missing out on earning from their mobile money deposits.

In other African countries, including Uganda and Tanzania, mobile money customers earn interest on their balances, making it similar to saving in a bank, a new report by the International Monetary Fund (IMF) reveals. The E-Money and Monetary Policy Transmission report —published last week— assessed environments around which e-money has been practised across five African countries with the fastest growth of e-money —Kenya, Tanzania, Nigeria, Ghana and Uganda. It shows that of the five countries, only in Kenya does the law block mobile money account holders and service providers from earning interest from deposits.

Governments in Africa require companies operating mobile money services to open accounts with banks, where they hold customers’ money, which earns interest.

“EMIs (E-money issuers/operators of mobile money platforms) have to establish a trust fund in banks to keep all the fundings received. These trust funds are treated equally with other bank accounts with respect to withdrawals, reserves requirements and other regulations.

“Interest distribution is not allowed, and, as stated in the 2014 National Payment System, any income generated from placements of these trust funds shall be donated to a public charitable organisation for the use for public charitable purposes,” the IMF report notes with regards to Kenya.

E-money regulations

Among the five, Kenya was the first to start mobile money operations when Safaricom launched M-Pesa in 2007, with Nigeria which issued MTN— its largest mobile network operator— with a licence to operate mobile money services in 2022, being the latest.

The government started regulating M-Pesa in 2014 when the National Payment System Regulations were enacted, with the law also prohibiting interest payments on mobile money balances to service providers.

“An e-money issuer shall not earn interest or any other financial return from the E-Money holder or customer. “Any income generated from placement of these trust funds shall be donated to a public charitable organisation for use for public charitable purposes,” the law stated.

Since the enactment of the National Payment System Regulations, M-Pesa Foundation has operated as Safaricom’s charitable arm, intended to be used for public charitable activities, from interest earnings on customers’ deposits that are invested. Before this, however, Safaricom’s ultimate parent firm, Vodafone Group, owned M-Pesa Holding Company Limited —the entity that holds and invests hundreds of billions of shillings in M-Pesa— and had the discretion to spend money earned from investing in Kenyans’ M-Pesa deposits as it saw fit.

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