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M-Money Maturing

Russell Southwood had a short story (full report at balancingact-africa.com) on Kenyan banks crying foul with the rapid expansion of mobile money credits acting profitably as current account institutions without the same regulatory oversight.  From Southwood’s emailed summary:

“Currently, the two leading mobile phone service providers – Zain and Safaricom – are offering money-transfer services in the country under Sokotele and M-Pesa brands respectively… To avert undue competition with the banking fraternity … M-Pesa and Sokotele services have to meet the capitalisation requirement as stipulated in the Banking Act. According to the Act, a deposit taking institution should maintain a minimum capitalisation of Ksh250 million ($3.5 million). This is however expected to double come December next year before hitting Ksh1 billion ($14.2 million) by 2010 after capitalisation requirements were amended in this financial year’s budget.”

How small is too small for regulation?  As clear from Kenya, small transactions at scale can leverage significant economic activity and worry the big bank competition.

The question was raised elsewhere this week.  The World Affairs Council of Northern California and UC Berkeley are holding a roundtable dinner next Wednesday with space reserved for UCB students if they address, in 150 words, some of the industry challenges as microfinance and m-money mature.  So any UCB students reading this post, check out BalancingAct for a few ideas.  A few choice subjects:

– When is a bank account a bank account?
– Does the market want mobile phone enabled financial services?
– What’s makes a successful customer business model interface?

The growth of the mobile services in microfinance has been breathtaking and defining the space where traditional banking, microfinance and mobile services intersect will continue to be a challenge as the technology matures and demand continues to grow.

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Written by Ben

October 17, 2008 at 1:06 pm

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