Government Considers Insurance Cover for Mobile Money Deposits in Kenya

The government is looking at a massive policy shift that could see mobile money deposits insured just like cash held in commercial banks. If the latest development is adopted, the move would safeguard funds held on platforms like M-Pesa, Airtel Money, T-Cash and other mobile wallets in case a bank that's holding them collapses.

This move comes at a time when mobile money is becoming the norm in Kenya - the way people save, send and spend money every day.

Why Mobile Money Insurance Is Being Considered

The Kenya Deposit Insurance Corp is in talks with mobile money operators and the Central Bank of Kenya to figure out how mobile money deposits can be included in the existing deposit insurance scheme.

The main reasoning behind this conversation is the fact that some mobile money balances are at a greater risk if a bank holding those funds collapses. Its a pretty unlikely scenario but one that could put hundreds of billions of shillings at risk.

How Mobile Money Funds Are Currently Stored

Mobile money balances aren't stored by the telecom companies themselves. Instead they're:

• Kept ring-fenced in trust accounts

• Held at commercial banks

• Managed by independent trustee firms

• Overseen by the CBK

For example, Safaricom has said that M-Pesa funds are deposited into top-rated banks and government securities - so they're pretty safe. This means customer funds are completely separate from the telecoms own money but there is still some issues regarding their safety.

The Insurance Gap That Affects Mobile Money Users

Kenya's deposit insurance scheme currently covers up to Sh500,000 per account if a bank fails. This works pretty well for individual bank accounts but mobile money funds are pooled together in trust accounts.

So if a bank that's holding mobile money trust funds were go out of business:

• The insurance would pay out on the trust account as whole

• Individual mobile money users wouldn't get direct compensation

• Only a small proportion of the total mobile money deposits could be recovered

Analysts are saying that the system has relied too heavily on people trusting mobile money operators - particularly Safaricom - but that just isn't enough in the modern world.

The Kenya Deposit Insurance Corporation Raises the Alarm

In a recent report, the KDIC pointed out that excluding mobile money from deposit insurance leaves a huge amount of Kenyans at risk.

“given that 82.3% of the population uses mobile money, excluding mobile money from deposit insurance leaves a big chunk of the population vulnerable,” they said.

The KDIC has actually recommended policy discussions with CBK and mobile money providers to come up with a framework that protects mobile money users if there are any financial shocks.

Mobile Money's Enormous Impact In Kenya

Kenya is a world leader in mobile money - its been around for nearly two decades now and was pioneered by the very successful M-Pesa service

Today:

• Almost 90% of Kenyans have access to formal financial services

• Mobile money is the main driver of financial inclusion

• M-Pesa controls about 89.7% of the market

• Airtel Money makes up roughly

Beyond transfers, mobile money platforms now offer savings, loans, merchant payments, and virtual banking services, making them deeply embedded in everyday life.