Plan to Separate M-Pesa from Other Safaricom Businesses on Course, Confirms CBK

The Central Bank of Kenya (CBK) has reiterated its commitment to the plan of separating M-Pesa, Safaricom’s mobile money service from its other business entities. The strategic move aims to enhance governance while minimizing disruptions on bank-related transactions. A recent statement from the CBK confirm that discussions with Safaricom’s board regarding this separation are imminent.

Quick Summary:

  • CBK confirms the continuation of plans to separate M-Pesa from Safaricom’s other businesses to bolster governance.
  • The Kenya Information and Communications (Amendment) Bill 2022 also seeks to mandate telcos to maintain separate accounts and produce distinct reports for each of their businesses.
  • M-Pesa remains a crucial revenue generator for Safaricom, contributing 42.1% of its revenue in the first half of the financial year ending September 2023.
  • Tax liabilities amounting to KSh 75 billion have posed challenges to the separation process, causing delays.
  • Despite delays, CBK emphasizes the importance of oversighting M-Pesa operations to ensure regulatory compliance and transparency.

Understanding the Developments:

MPESA has for years gained traction in the country to the extent that its described as a monopoly. The move to separate M-Pesa from Safaricom’s broader operations gained momentum back in 2022 when CBK initiated discussions with telecommunications companies to delineate mobile money activities. The aim is to streamline regulatory oversight and mitigate risks associated with integrated business models.

Financial Impact:

  • M-Pesa remains a significant revenue contributor to Safaricom with its share increasing from 39.3% to 42.1% in the six months leading up to September 2023.
  • Profitability in Safaricom’s Kenyan business sector has seen notable growth, recording a 10.9% increase in profits during the same period.

Operational Metrics:

  • Active M-Pesa customers and merchants have witnessed steady growth, reflecting the service’s continued popularity and adoption.
  • M-Pesa’s role in driving financial inclusion in Kenya has been substantial, with coverage expanding from 26.7% in 2006 to an impressive 84% in 2021.

Legislative Support:

  • The Kenya Information and Communications (Amendment) Bill 2022 seeks to formalize the separation of telcos’ business entities and mandate distinct financial reporting for each segment.
  • Safaricom’s recent milestone in obtaining a mobile money license in Ethiopia underscores its expanding regional footprint and the significance of regulatory compliance across jurisdictions.

Potential Impact:

The separation of M-PESA business from other Safaricom’s operations is expected to enhance regulatory oversight while bolstering transparency and ensuring the sustainable growth of Safaricom’s mobile money business. By addressing tax liabilities and regulatory complexities, stakeholders can pave the way for a smoother transition and reinforce Kenya’s position as a regional leader in mobile financial services.

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