Money Matters

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Michuki: Probe cash transfer…

The Government on Tuesday ordered an audit of Safaricom’s M-Pesa money transfer system just a day after the mobile phone service firm signed a deal with Western Union for international cash transactions…

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M-Pesa Panic: Who is Afriad Of Michael Joseph?


Reposted with permission from Kumekucha. The original article can be found here…

It seems that ordinary Kenyans are constantly on a collision course with the rich and corrupt in this country. Even as the MPs refusal to pay taxes and the media bill fiasco rages there is more trouble brewing in the horizon with the M-Pesa controversy. Truly bado mapabano.

Michael Joseph, CEO, Safaricom.

I know business is terribly boring to many of you my dear readers, but kindly bear with me for a few minutes and I will explain in simple terms what every Kenyan must know.

Acting Finance Minister has ordered an audit of Safaricom’s M-Pesa and has expressed fears that the popular service could be used for money laundering saying that the relevant experts and government bureaucrats should investigate the matter urgently. The timing of the statement was not lost on keen observers because Safaricom’s parent company, Vodafone had just finalized a mega deal with Western Union that will allow direct transfer of funds to M-Pesa subscribers in Kenya on their phones.

Let us not waste time with many words. What Michuki is saying is RUBBISH!!! Pure and simple. And there are many reasons for this. Firstly saying that somebody would use M-Pesa to launder cash is like saying that thugs will use 5 rounds revolvers to outgun the flying squad’s automatic AK-47s and Israeli Uzis. M-Pesa has a limit of Kshs 35,000 for every individual transaction. For money laundering to work well, one needs huge transactions to clean money and that is why the Nakumatt Supermarkets route for money launders worked like a dream. Just think about it, how many transactions of Kshs 35,000 would one need to “clean” a mere billion shillings? Mind boggling isn’t it? Then there are a couple of other safeguards that Safaricom have put in place that I will not go into just now.

So now that we have established that Michuki is talking rubbish, let us try and figure out exactly what is really happening here.

We know for a fact that the Finance Minister has close contacts of many years in the local Banking industry, some sources even claim has substantial interests. It is clear that the pressure on Michuki to talk as he is talking is coming from mainstream banks. So the next question is how does a money transfer service mainly for ordinary folk like M-Pesa threaten the banking industry?

First of all I want to remind you that the remittance of Money back home by Kenyans in the diaspora has been the main foreign exchange earner for Kenya for a number of years now (but the government only started talking about it recently). All that money until now has been paid through the banks. You can imagine how much mainstream banks are earning from it in terms of commissions when people go to them to cash in funds from Western Union. Indeed that is one of the very few big profit areas remaining for banks these days. One of the reason is that big banks like Barclays and Standard Chartered have not been able to figure out yet how to attract back the small man in large enough numbers to make a difference. Well there is also the little matter of numerous Kenyans who were chased away (and abusive language was used) by these banks when they closed numerous “small accounts” as they were drunk with Treasury Bill interest profits. The banks said that these small customers were not viable and were a waste of time. Which was probably true at the time because widespread use of ATMs had not yet penetrated this market. My point is that too many Kenyans still have bitter memories of these big banks.

Then the big customers they were relying on when they chased away “small accounts” are dwindling in number, besides they are too few to go round the numerous banks we have in Kenya all scrambling for them. (Did you know that Kenya has the highest number of banks in sub-Saharan Africa at 46? Higher than Nigeria and South Africa?). Not to mention the global economic melt down that has hit some local banks very hard.

Secondly Zain have announced that plans are at an advanced stage to launch cell phone banking in Kenya. M-Pesa is strictly a money transfer service and it has already proved to be devastating to banks, now imagine what the effect of a full cell-phone banking service would be? And to make matters worse, this comes at a time when banks have been hit hard by the Equity Bank phenomenon. As you read this we have a total about 4 to 5 million account holders in Kenya. Out of those over 2.5 million (and rapidly growing) are with Equity Bank. The big banks have tried everything, including spreading malicious lies that Equity is in financial trouble or is headed for collapse. It has not worked. They have also poached staff in hoards from Equity, but they have still not been able to replicate the Equity Bank magic. Well I have some free advice for them. The executives who make key decisions at these banks need to move from Westlands and Kilimani and live somewhere like Dandora or Eastlands for a month to even begin to understand the ordinary Kenyan, the very person they are trying to attract as a client.

The bottom line is that M-Pesa is a very convenient service for many poor and middle class Kenyans and they have responded by using it in such huge volumes. The service is a vital lifeline for many ordinary wananchi now.

Contrast that with the real money launderers of Kenya who are Mr Michuki’s colleagues in the crowded grand coalition cabinet. Remember the still unresolved Anglo-Leasing scam? Remember the leaked Kroll report which detailed billion of shillings being laundered abroad, some of it from Nigeria’s former dictator Sani Abacha coming to Kenya on transit abroad? Ironically the worst crimes in Kenya’s financial sector have been committed by the so called big banks. Citibank for instance is the main bank that has been used by the likes of Gideon Moi to transfer huge sums of stolen public funds overseas, according to the Kroll report and other impeccable sources.

So what is Michuki really up to? Is the idea to shut down M-pesa so that the big banks benefit? Or perhaps to introduce new regulations to ensure that all the cash passes directly through banks who will charge hefty commissions of course?

Is Michael Joseph A Business Genius Or What?


Reposted with permission from Kumekucha. The original article can be found here…

It is ironic that one of the reasons why Michael Joseph was posted to Kenya by Vodafone was because it was felt that he did not have the necessary “papers” to head a Vodafone operation in Europe or elsewhere. So Africa was the place. And yet keen observers have been able to quickly identify this man as one of the major driving forces behind the phenomenal success of Safaricom.

He came up with and pushed the M-Pesa idea very hard even when it looked like a pretty risky venture that could go badly wrong. But what really bawled me over were the recent events at the mobile phone operator.

It all started when Zain (formerly Celtel) came up with the Kshs 3 a minute call rate and were quickly followed by Orange mobile’s Kshs 1 a minute call rate.

I must admit that even I thought that this was the beginning of the end of Safaricom. I said to myself that their M-Pesa service would come in very handy now that there would be greatly reduced profits from their core revenue source of talk air time. And there were good reasons for this deduction. The Safaricom IPO had caused a lot of anger against the company as the shares continue to plummet. Then it was clear that what was going to result was a price war of sorts. Maybe Safaricom would have to come up with a call rate of 90cts a minute or something, thought.

But even as the dark clouds continued to gather rapidly at the Safaricom headquarters along Waiyaki Way in Nairobi, Michael Joseph and his troops were preparing to pull yet another rabbit from the hat.

That “rabbit from the hat” was the Jibambie campaign where call charges are pegged on the air time value that a customer purchases with a Kshs 1,000 scratch card qualifying for a kshs 3 per minute call rate (lower than the Kshs 4 rate that has always been charged to post paid customers).

This single idea completely changed the ground rules. Kshs 1,000 cards have suddenly become very popular which in turn has greatly revived the dealer and re-seller interest which had rapidly been waning in the days when Bamba Mbao (The Kshs 20 scratch card) ruled. Naturally with higher commission potential, every small shop and retail outlet now sells the Safaricom Kshs 1,000 scratch cards these days. Imagine what that does to the company treasury apart from helping the company avoid an ugly price war and in the process completely changing the ground rules? So far there has been absolutely no response from their competitors to this “checkmate” move.