Kenya's leading telecommunications company, Safaricom, alongside several commercial banks, is currently engaged in discussions with the Central Bank of Kenya (CBK) regarding the cessation of the zero-rated policy on mobile money transactions. This policy was initially implemented as a measure to mitigate the economic impact and spread of the COVID-19 pandemic, allowing for free mobile money transfers.

The telecom giant and the banks are advocating for a mutual agreement with the CBK that would require consultation before any decision to extend the free mobile money transfers beyond the current December 31 deadline. While Safaricom CEO Peter Ndegwa refrained from disclosing specific details, he confirmed ongoing engagements with the CBK. Similarly, Joshua Oigara, CEO of Kenya Commercial Bank (KCB) Group, expressed optimism about restoring charges for certain mobile money transactions, indicating that while some may revert to previous charging structures, others might continue under the current waiver.

The zero-rated policy, first introduced by the CBK in March, waived charges for person-to-person (P2P) mobile money transfers below KSh1,000. Additionally, all fees for transfers between mobile money wallets and bank accounts, levied by both mobile money operators and commercial banks, were abolished. The CBK's rationale was to encourage the use of mobile money over cash transactions, thereby assisting in containing the spread of COVID-19 and supporting Kenyans through the pandemic. In June, the CBK extended this policy from July until December 31.

While these measures significantly boosted mobile money subscriber numbers by over 1.6 million, they inflicted a substantial financial toll on operators and banks. Safaricom's unaudited financial results for the six months ending September 2020 revealed a year-on-year decline in M-Pesa revenue by 14.5%, dropping from $385 million to $329 million. This $56 million fall was primarily attributed to the company's compliance with the free mobile money transfer directive. Despite a 32.9% year-on-year growth in M-Pesa transaction value to $82.9 billion, the value of transfers and payments decreased by a combined 55.3%, amounting to $55.96 million.

Zero-rated transactions on M-Pesa alone were valued at an estimated $16.14 billion (KSh1.76 trillion). However, this high transaction volume did not translate into transfer revenue for M-Pesa, as all P2P transfers under KSh1,000, along with wallet-to-bank transactions, were processed free of charge between April and September. Notably, transfers below KSh1,000 constituted over 80% of all mobile money transfers in Kenya during this period, transactions that would have previously incurred charges ranging from KSh11 to KSh49.

KCB Group also reported a significant financial hit, with its net profit plummeting by 43.1% in the nine months ending September 2020. The bank estimated losses of up to $13.8 million due to the free bank-to-wallet transfers on mobile money platforms. Prior to the zero-rating policy, bank-to-M-Pesa transactions attracted fees between Sh30 and Sh197. The waiver of these fees meant banks could not generate revenue from these transfers following the CBK directive.

In conclusion, Safaricom and KCB have emerged as major casualties of the free mobile money transfer policy implemented by the CBK. Given the substantial decline in their profits, their collective efforts to lobby against any further extension of zero-rated transfers beyond December 31 were largely anticipated.