Kenyans using popular money transfer service M-Pesa to get bank loans can longer do so. The bank involved suddenly cut the service following a legislation update.
M-Pesa Loans ‘On Hold For Now’
M-Pesa users can access and move funds using a mobile wallet and hence do not need a bank account. Small-scale borrowers, it is feared, will be placed in a difficult situation should the function not return.
A KCB staff member told The Star that “loans on KCB M-Pesa have been put on hold for now.” An official response from the bank itself has not yet surfaced.
Loans in fact disappeared in August when the service went in for a “technical upgrade.” However, KCB did not reinstate the service prior to the new banking legislation taking effect. The rules now state that commercial interest rates cannot be more than 400 basis points above the central bank’s base rate, currently 10 percent.
“What we know is that KCB stopped giving mobile loans after the banking law came into effect,” Stephen Mutoro, secretary general of the Consumer Federation of Kenya said. “We see this as a means of sabotaging the new banking law in the hope that the rate caps will be amended.”
BitPesa Unfazed, Expansion Continues
Rival services such as BitPesa, which cuts out the need for bank intervention by combining mobile wallets with Bitcoin as the transfer medium, have seen considerable growth in an attempt to disrupt the monopoly held by M-Pesa, mobile provider Safaricom, and its banking partners.
BitPesa, which has since expanded to include several African nations as well as offering international remittances, remains unaffected by the KCB move.
The news comes as Visa also announced this month its intention to compete in the Kenyan mobile payments sector with its mVisa product.
However, given the need for users to have a bank account, Visa cannot compete with the swathes of the competition’s target market — those for whom traditional bank loans and payment are either impractical or impossible due to their status.
BitPesa, though, has not been without its setbacks since its launch. The service could continue to face legislative problems of its own.
The service got involved in a legal debacle with Safaricom after the latter suspended access for its payments partner Lipisha. Lipisha allowed BitPesa to offer its customers the option to pay using their M-Pesa wallets. However, the legal status of Bitcoin led to Safaricom cutting ties, the move upheld in court last December.
In January 2016, BitPesa signed a new agreement with international provider Airtel Money.
What do you think about the latest developments in Kenya? Let us know in the comments section below!
Images courtesy of Oleg Znamenskiy via Shutterstock, M-Pesa, BitPesa.
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