Kenya Country diagnostic

PRIME AFRICA Contents

1. Migration and Remittances 4. Remittances Market Structure • Remittance flows into and out of Kenya • Market Structure and Value Chains • Emigration and Migration • Pricing and Transparency • Informal remittance flows • Access • Remittance data collection frameworks • Informal channels • PRIME Africa Corridors

2. Financial Services Landscape 5. Financial Services for Remittance Users • Payment systems infrastructure and payments interoperability • Financial services for diaspora • Know Your Customer requirements • Case studies of innovation • Distribution of access points • SACCOs, Fintechs and payment integrators 6. Stakeholder and Coordination • Financial Inclusion

• Mobile Money Usage and Growth 7. Policy Actions

3. Regulatory Environment 8. Annex • Overview • Licencing 9. Bibliography • Compliance • Other association regulations

Co-funded by the European Union

PRIME AFRICA 2 Objectives

The Platform for Remittances, Investments and Migrants’ Entrepreneurship (PRIME Africa), is an initiative of the International Fund for Agricultural Development (IFAD), through its Financing Facility for Remittances (FFR), in partnership with the European Union. It aims to address the development opportunities that remittances provide through innovations, partnerships and scalable products that promote more affordable and fast remittances transfers. Prime Africa’s Objectives are:

1) To reduce remittance transfer costs to Kenya in support of the Sustainable Development Goal (SDG 10.c) and the Global Compact for Migration

2) Reduce the use of informal channels to Kenya

3) Enhance financial inclusion through remittance-linked financial services.

This Diagnostic provides an assessment of Kenya’s remittance market, especially in light of COVID-19, using a market-oriented approach. It covers a supply side analysis as well as a review of 3 key inbound corridors.

The findings and recommendations of this diagnostic study will inform the ‘Roadmap’ for a prioritised approach to interventions leading to the achievement of PRIME Africa goals. It is envisaged that funding will be made available for the public and private sectors for Roadmap implementation. Methodology

Data and relevant information for this diagnostic study have been gathered using:

1. Primary Data Collection • Interviews with key stakeholders: regulators, associations, remittance service providers (money transfer operators, banks, mobile network operators, aggregators and fintech start ups offering cross border remittances) • Mystery shopping exercises for data related to service providers, pricing and products

2. Secondary data • Desk-based research -Review of relevant, recent and authoritative sources Data collection was conducted between October 2020 and January 2021.

Two-virtual National Task Force Meetings are scheduled for Q1/Q2 2021.

PRIME AFRICA 3 Abbreviations ADLA Authorised Dealer with Limited Authority FSPs Financial Service Providers NPS National Payments System AfDB African Development Bank FX Foreign Exchange NSSF National Social Security Fund AfCFTA African Continental Free Trade Area GCM Global Compact for Migration NTSA National Transport and Safety Authority AFI Alliance for Financial Inclusion GDP Gross Domestic Product ODA Overseas Development Assistance AML/CFT Anti-money Laundering / Combating the Financing of GoK Government of Kenya PASS Pan African Switch System Terrorism G2P Government-to-person PEAs Private employment agencies API Application Programming Interface IB/OB Inbound/Outbound POS Point of sale B2B Business-to-business IGAD Intergovernmental Authority on Development PSPs Payment Service Providers CAK Communications Authority of Kenya IMTOs International Money Transfer Operators P2P Peer-to-peer CBK Central Bank of Kenya IOM International Organization for Migration P2G Person-to-government CDD Customer due diligence KBA Kenya Bankers Association Regtech Regulatory Technology CMA Capital Markets Authority KDIC Kenya Deposit Insurance Corporation RSPs Remittance Service Providers CRR Cash Reserve Ratio KEPSS Kenya Electronic Payment and Settlement System REPSS Regional Payment and Settlement System CRRF Comprehensive Refugee Response Framework KITS Kenya Interparticipant Transaction Switch ROSCAs Rotational Savings and Credit Associations DFS Digital finance service KMP Kenya Municipal Program RTGS Real Time Gross Settlement DMAG DMA Global KYC Know-Your-Customer SACCOs Savings and Credit Cooperatives DT-MFIs Deposit-taking MFIs MFIs Micro Finance Institutions SARB South African Reserve Bank EAC East African Community MMPs Mobile Money Providers SASRA SACCO Societies Regulatory Authority EAPS East African Payment System MoMo Mobile Money SDGs Sustainable Development Goals EAMU East African Monetary Union MNOs Mobile Network Operators SLA Service-level agreement ESAAMLG East and Southern Africa Anti-Money Laundering MRPs Money Remittance Providers SOE State-owned enterprise Group MSDG Migration and Sustainable Development in Kenya SSA Sub-Saharan Africa FDI Foreign Direct Investment MTOs Money Transfer Operators Suptech Supervisory Technology FGD Focus group discussion MVNO Money virtual network operator VSLAs Village Savings and Loan Associations FinTech Financial Technology NBFIs Non-Bank Financial Institutions W2B Web to business FIU Financial Intelligence Unit NHIF National Hospital Insurance Fund FRC Financial Reporting Centre Non-DT Saccos Non-deposit-taking SACCOs

PRIME AFRICA 4 Summary

Migration and Remittances

• Kenya is a net inbound remittance market, receiving USD just over 3 billion in 2020 (with the USA and UK as the main sending markets), compared with outflows at USD 710 million (2018). Remittances account for nearly 3% of GDP and are a leading source of forex in the country. • The USA, the UK, South Africa, the UAE and Germany are the top send countries (CBK 2020), while according to the FinAccess Survey 2019, Uganda, Tanzania and the USA are the main receive countries. Germany is the largest send market from the EU, although volumes are small (USD89 million in 2020). • Remittance inflows into Kenya hit a record high in 2020 despite COVID-19 and both the World Bank and the Central Bank of Kenya (CBK) projecting a fall. Whilst the underlying reasons behind this increase are still unknown, it is thought to be due to an increase in the use of formal remittance services and people sending additional funds to support relatives back home. • Kenya is a net receiver of migrants with a mixed migrant profile. It hosts over 1 million immigrants, 47% of whom are refugees and asylum seekers. • There are an estimated half a million Kenyans formally living overseas, who are largely skilled and use legitimate channels to migrate mostly to USA, Europe and within Africa. Increasingly, lower skilled Kenyans also migrate to the Middle East, with estimates suggesting there are as many as 120 thousand Kenyans living there (official data is unavailable). • There is also no data available on the prevalence and scale of informal remittance flows from and to Kenya, however, stakeholder interviews suggest that it is commonplace from border countries. • The CBK currently collects and publishes total remittance inflow data in USD on a monthly basis, broken down into North American and European flows and the Rest of the World. It also publishes an Annual Report with a summary of the sector performance.

Financial Environment

• Kenya has a well-developed national payments system (NPS) to support remittances, however regional payment systems with potential to reduce costs of intra-regional remittances are underutilised. The CBK is reviewing its National Payment Strategy 2021-2025 which outlines measures to enhance Kenya’s global lead in digital payments. • Kenya has well-established civil registration and national identification systems, where 88% of people have a foundational ID, and is in the process of implementing integrated biometric identification as a next step. • The financial services distribution network is extensive and comprises bank and non-bank providers, mostly concentrated in urban areas. • SACCOs play an important role in providing financial services and are increasingly formalizing their operations. Fintechs have made a strong entry into the market heightening product diversity and competition. • Financial inclusion levels are one of the highest in Africa with 8 out of 10 adults formally financially included. This has mainly been achieved through the uptake and use of mobile money wallets (79% of adults). • M-PESA is a dominant market player in Kenya's mature mobile money landscape, characterized by activity levels of above 50% and 66% of the customer-base using advanced digital financial services (such as saving, credit and insurance products).

PRIME AFRICA 5 Summary

Regulatory Environment

• Money Remittance Regulations for providers wishing to offer inbound and outbound remittances are clear and include mobile money providers. Kenya has no foreign exchange control regime; however, remittance provider types are limited, and licensing and approvals may take considerable time. • There are 17 licensed Money Remittance Providers (MRPs) in Kenya. IMTOs do not need to be licensed but operate through commercial banks and licensed MRPs as agents. • Following increased incidents of suspected terrorism funding and a rapidly growing financial services market, Kenya has developed a robust AML/CFT framework. In 2015, 13 MTOs were closed until they could demonstrate compliance. • Risk-based CDD is discretionary and applies to various financial products and to all FSPs, banks, non-banks and PSPs, but there are no tiers or thresholds and there are no lower-risk or basic accounts. • Kenya has consumer protection and data privacy laws that cover international remittances; however, services (especially digital) are not always transparent in terms of pricing and dispute resolution mechanisms are always not clear for digital-based services which undermine trust. • Kenya has deposit protection insurance in banks, deposit-taking MFIs and mortgage companies. It also requires operating RSPs to hold some funds in an escrow account. Kenya also has taxation of mobile money and has just introduced digital service tax, which will both increase the cost of using digital remittance services.

Remittance Market Structure

• The structure of the Kenyan remittance landscape varies according to the different migration profiles. It is a highly digitized market driven by high financial inclusion rates and prevalence of mobile wallets. More than half of all remittances are terminated into M-PESA wallets, and over half of transactions are channeled through Equity Bank. • Remittance value-chains to and from Kenya involve a number of players, including the sending party, banks or international remittance aggregators, a licenced entity in the receive market and pay-out sub-agents. Digital remittance services should be much more streamlined that traditional cash-based that rely on partners and pay-out agents. • In Kenya 41 commercial banks, 14 Deposit Taking (DT) MFIs, PostBank, 17 money remittance providers and two MMP have direct license to offer inbound and outbound money transfers. IMTOs partner with these entities and pay-out via their own networks and sub-agents (mainly forex bureaus and lower-tier banks). • Whilst market share data for companies is unknown, the type of services and operators used vary by geography, corridors and the profile of migrants. Whilst there is no official data, interviews suggest SendWave and WorldRemit are the largest senders of remittances into Kenya globally.

PRIME AFRICA 6 Summary

Remittance Market Structure cont.

• At 7.5% of the send amount, the average cost of sending remittances to Kenya is above the SDG recommended 3%, but lower than the average cost for SSA 8.5% and other intra- Africa corridors. There are low-cost services from many of the largest send-markets where competition is more intense. • There is low transparency in Kenya (as in many other countries) on the range of remittance services and the total cost of sending / receiving money. Whilst transparency is mandated by the Government, full disclosure on total costs to non-customers is often unavailable. • Digital channels are driving down remittance costs although full impact is yet to be realized as players set up cross border integration partnerships. It is possible to send remittances mobile-to-mobile wallet to 7 other African countries from Kenya, and it is possible to receive remittances mobile-to-mobile from 6 countries, making it one of the most integrated globally. • Access to international remittances in Kenya is among the best on the continent, with a good distribution of MTO agent locations and mobile money agents (where funds have been received into wallets). • Anecdotally, the use of informal channels to send and receive money to/from Kenya is high, especially within the East African region. Hawala service providers are also prevalent, although many of the Somali hawala providers are registered as MTOs in Kenya. • The main informal channel used within the region is via registered and unregistered M-PESA agents residing in other countries and offering cross-border money transfer and cash- in/cash-out services. • PRIME Africa will focus programme activities in three inbound remittance markets to Kenya, including Germany from the EU and intra-Africa, Uganda and South Africa. • The average cost of sending money from Uganda to Kenya is 4.1% of the send amount. However, stakeholders suggest that the Uganda to Kenya remittance corridor is still predominantly informal with transfers made through unapproved M-PESA agents. These services may even cost more than formal mobile-money transfers, but customers are willing to pay a premium for the trusted service. • Kenya's diaspora in South Africa is relatively small with a mix of formal and informal migrants. Stakeholder interviews portray a growing corridor since COVID-19. Notable usage of informal channel includes Hawala traders and routing money through Botswana to avoid foreign exchange controls. • The Kenyan diaspora in Germany is the largest in the EU, however, it is still very small with 14 thousand people. Whilst average costs are relatively high at 7.7% of the send amount, online operators such as WorldRemit and SendWave have much more competitive pricing around 3% of the send amount.

PRIME AFRICA 7 Summary

Financial Services for Remittance Users

• Kenya has high levels of financial inclusion in terms of account ownership. However, there are opportunities for remittances to further drive usage and increase linkages between payment channels and financial services. The Kenyan banks offer a wide range of diaspora-related financial services, but Kenyans abroad can also access domestic products and services. • The Kenya financial service providers offer a diverse range of diaspora-focussed financial products. There are not many products focussed specifically to remittance beneficiaries. • Equity Bank and Kenya Commercial Bank provide two examples of innovation in diaspora financial services. Kenya is a global leader in financial services for the diaspora.

Stakeholder Coordination

• At present, interventions from development partners on remittances are limited in Kenya, apart from descriptive research studies. The CBK plays an active role in supporting the sector, and the Remittance Association advocates for the sector’s interests.

PRIME AFRICA 8 Summary Priority Policy Actions

A. Implement a Remittances Data Strategy that enables improved data analytics and generation of market information, including disaggregated remittance inflows, outflows, channel usage and estimates of informal flows. A review should also include the impact of COVID-19 on the market-place.

B. Expand remittance providers licensing categories to ensure even distribution of access points, improved access and choice.

C. Identify and leverage opportunities for cross-border remittance payment and settlement through regional bloc retail payment systems.

D. Improve transparency in the remittances market and review pricing and cost structures.

E. Address the high use of informal remittance services within the region.

F. Champion an open API culture for ID authentication and verification and between banks and payment service providers (PSPs).

G. Support transition to full payment ecosystem interoperability across channels.

H. Financial education and awareness especially around international remittances, fraud, cyber security and consumer protection.

I. Support industry to lead in innovation for world-leading remittances, payments and remittance linked financial services.

J. Leverage the National Remittances Taskforce Meeting to create a Working Group for the coordination, implementation and review of improving Kenya's remittance landscape.

PRIME AFRICA 9 Migration and Remittances

Remittance flows into and out of Kenya

This section provides an overview of the migration patterns and other socio- economic activities that drive inbound and outbound remittances in Kenya as Emigration and Migration well as a sender/receiver profile. It also examines informal flows, accuracy, consistency and accessibility of remittance data.

Informal remittance flows

Important Note on Data:

Remittance data collection frameworks There are a number of different data sources that are used in this next section. Data is not always consistent across the different sources. Data, where available, has been used by the Kenyan Government, but is supplemented by international databases where data it is not.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 10 Kenya is a net inbound remittance market, receiving USD 3 billion in 2020, with the USA and UK as the main sending markets, compared with outflows at USD 710 million (2018). Remittances account for nearly 3% of GDP and are a leading source of forex in the country. Inbound Remittances (millions of US$) • Kenya is one of the five highest remittance-recipient countries in Africa, receiving USD 2,787 million in North America Europe Rest of World Total 2019 (CBK, 2019)[1] after Egypt (USD 26,781 million); Nigeria (USD 23,809 million); Morocco (USD 6,735 million) [2]

and Ghana (USD 3,521 million) (World Bank Annual Inflows 2019a). 0943 2 7872 2 6872 • Remittances to Kenya remained resilient against the backdrop of COVID-19 and recorded record highs in

2020. Remittance inflows stood at USD 299.6 million for the month of December 2020, compared to USD 250.3 9471 million for December 2019, constituting a 19.7% increase. At the end of 2020, cumulative remittance inflows 7441 1 3431 stood at USD 3.094 million, a 10.7% increase from USD 2.787 million in 2019.[1] 3391 1 0041 863 813 791 663 629 537

• Remittances are an important economic driver in Kenya's economy, contributing 3% to its GDP in 2018 446 (World Bank, 2019b)[3] and recording higher levels than foreign direct investment (FDI)[4] and portfolio equity flows. 314 Cash inflow from citizens working abroad is now Kenya’s leading source of forex, ahead of tourism and agricultural exports.[5] Remittances are included in Kenya’s Vision 2030, the National Migration Policy, the Kenyan Diaspora 2017 2018 2019 2020 Source: CBK, 2017-2020[1] Policy and the Draft Payments National Strategy with commitments to grow remittances and reduce the cost. Total remittance inflows and outflows for Kenya (in • According to the CBK (2021),[7] top inflows in 2020 were from: USA (USD 1.67bn, 54%); UK (USD 230mn, millions of US$) 7%); South Africa USD 195mn (6%), Germany USD89mn (3%) the UAE USD73mn (2%) (author’s own Total outflows Total inflows calculations based on data from the CBK). 2 7192

• The World Bank estimates that remittance outflows from Kenya were USD 710 million in 2018 ((World Bank, 1 9701

Bilateral Matrix, 2018). The CBK does not publish outbound remittances or inflow data by corridor. According 7391 1 5611 to the Matrix, which is based on estimates where data is unavailable, the top 5 outbound remittances destinations for 2018 were: Uganda (USD423m, 59.5%), India (USD84m, 11.8%); Tanzania (USD35m, 4.9%), Egypt (USD18m, 2.5%); and Nigeria (USD13m, 1.8%). According to the FinAccess Survey 2019,[8] the largest outbound corridors 710 357 are Uganda (24%), Tanzania (12%) and the USA (10%). 319 319

2015 2016 2017 2018 Source: World Bank Bilateral Remittance Matrix, 2015-2018[6]

PRIME AFRICA 11 The USA, the UK, South Africa, the UAE and Germany are the top send countries (CBK 2020), while according to the FinAccess Survey 2019, Uganda, Tanzania and the USA are the main receive countries. Germany is the largest send market from the EU, although volumes are small (USD89 million in 2020).

Source: FinAccess Survey 2019[9a]

• The FinAccess Survey 2019 is a survey of 11,000 households across Kenya. As Source: CBK, 2021[9b] outbound remittance data is not available by corridor from the CBK, the FinAccess Survey results provides insight. It is not clear from the survey the number of • This data has not been officially published by the CBK. The data captures households that received or sent money. formal remittance flows by corridor. The data shows that remittance inflows • The FinAccess Survey captures remittances sent both through informal from the USA increased in 2020, accounting for nearly 60% of flows in Q4 channels as well as through formal. This may help explain some of the 2020. Remittances from the UK account for 7%. Inflows from South Africa discrepancies between the formal data from the CBK for inbound 2021 (graph on dropped significantly in Q4 2020. the left) and the FinAccess survey results, especially regarding inflows from Uganda. Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 12 Remittance inflows into Kenya hit a record high in 2020 despite COVID-19 and both the World Bank and the CBK projecting a fall. Whilst the underlying reasons behind this increase are still unknown, it is thought to be due to an increase in the use of formal remittance services and people sending additional funds to support relatives back home.

• In response to the COVID-19 pandemic, Kenya had a temporary decline in remittance inflows then recovered and experience growth; remittance inflows stood at USD 299.6 million for the month of December 2020, compared to USD 250.3 million for December 2019, constituting a 19.7% increase (CBK, 2021).[10] Total global remittance inflows into Kenya for • The CBK had projected a decline of 12.3% (USD 338m) but later revised projections after seeing an 2020 increase of 1% (USD 24.7m) in June 2020. The World Bank also projected a 23.1% fall for Sub-Saharan N.B. COVID-19 pandemic started in March 2020 African countries in April 2020[12] but revised this to a 9% decrease in October 2020[13] . Looking forward, the (in USD million) [13] World Bank predicts a decline in 2021 as the full impact of diaspora job losses and declining business 350 performance is fully realized. 288.5 299.6 300 277.0 274.1 259.4 258.2 260.7 263.1 257.7 250 219.0 229.0 • The increase in remittance inflows could be related to either the diaspora deepening their support against 208.2 200 economic hardships at home, or as a result of travel restrictions prompting a significant shift from informal to formal channels for sending money home. At present this analysis is hypothetical and not supported by data. At 150 the height of the lockdown in Kenya, financial service providers, including remittance providers, remained open 100 which would have supported the use of formal channels. 50 0 • In response to COVID, the CBK put in place measures to support the economy and the use of digital payments (see Annex 1). Between February and October 2020, the volume of mobile money transactions up to Ksh. 1000 increased by 114% with 200% increase in value, this tier accounts for over 80% of transactions. In the Source: CBK (2020, 2021)[10][11] same time period, the monthly volume of payment service provider (PSP) transfers increased by 87% and business-related transactions increased by 82% and there were 2.8 million additional 30-day active customers using MoMo.[14] CBK measures were implemented from March 16th 2020 and gradually ended by 31st December 2020,[14] mPesa then issued a 45% price reduction targeting low value transactions under Kshs 1.000 (USD 10).[15]

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 13 Kenya is a net receiver of migrants with a mixed migrant profile. It hosts over 1 million immigrants, 47% of whom are refugees and asylum seekers.

Kenyan Migrant Stocks 1990-2019

1 200 000

• Kenya is mainly a destination and transit country for people in mixed migration flows from East 1 000 000 Africa, including refugees; irregular and economic migrants; and trafficked persons. Migrants, 800 000 mainly from African countries, transit through Kenya to reach South Africa; the Middle East; North Africa; 600 000 West Africa; Europe; and North America (ILO, 2020).[16] 400 000 200 000 • In 2019, there were just over 1 million international immigrants in Kenya (1,044,854) and as of July 2020, 496,289, (47%) of these migrants were refugees and asylum seekers (latest data available) 0 (UNDESA, 2019; UNHCR, 2020a).[17][18] 1990 1995 2000 2005 2010 2015 2019

Emigrant Immigrant Source: UNDESA (2019)[17] • Kenya is host to the third largest number of refugees and asylum seekers in the region, following Uganda (1,444,873) and Ethiopia (916,678) (RMMS, 2018).[19] The majority of refugees are from Somalia Immigrants into Kenya and Refugee & Asylum Seeker (53.9 per cent), while South Sudanese (24.7 per cent); Congolese (9 per cent); and Ethiopians (5.8 per Numbers cent) make up the other major nationalities (UNHCR, 2020b).[20] This is attributed to: its geographical location amidst neighboring countries which have suffered repeated civil strife and wars; having a relatively reliable transportation network; and stable economy (IOM, 2018: 48).[21]

• Labor migrants from Asian countries, such as Bangladesh, India, and Pakistan, are also found in Kenya; they mostly come to set up businesses (MGSOG, 2017: 6)[22], although actual numbers of this category of migrants are yet to be published.

Source: UNHCR (2020a)[18]

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 14 There are an estimated half a million Kenyans formally living overseas, who are largely skilled and use legitimate channels to migrate mostly to USA, Europe and within Africa. Increasingly, lower skilled Kenyans also migrate to the Middle East, with estimates suggesting there are as many as 120 thousand Kenyans living there (official data is unavailable).

• Kenyan emigrants stand out for being skilled and educated and leave for employment or education abroad Migrant Stock by Destination through regular means. Total number of emigrants are estimated to be 525,400; top destinations are: United Kingdom, United States of America, Uganda, Canada and South Africa (UNDESA, 2019a).[24a] Total number Other U.K Countries 149,797 145,942 • The number of Kenyans formally living in other African countries are higher than those residing in EU (29%) (28%) countries, with 137,969 Kenyans residing in Africa versus 38,229 in the EU. The top host countries include neighbours Uganda, Tanzania and others such as South Africa and Mozambique (UNDESA, 2019b).[24b] Stakeholder interviews suggest there are significantly more Kenyans in South Africa who did not use legitimate migration channels.

• According to the UNDESA (2019b), Germany has the largest Kenyan diaspora in the EU with 3% of the total South Africa diaspora, approximately 14,000 Kenyans residing there. Across the EU, Kenyan diaspora sizes are small, 28,769 below 5000 in each country. The next largest Kenyan diasporas in the EU are in Sweden and Italy with an (5%) estimated 5,000 and 4,000 people, respectively.

• Increasingly, low-skilled Kenyan migrant workers migrate to the Middle East and the Gulf countries for Canada Uganda USA work, as job opportunities are generally more than in other regions. This emigration type is facilitated 28,920 36,822 135,187 by private employment agencies (PEAs). Kenya has has a tightening of immigration processes to the Middle (5%) (7%) (26%) East. Except for Egypt, Libya, Sudan and Turkey, data on the number of Kenyans in Middle East and North Africa Source: UNDESA (2019b)[24b] (MENA) countries is limited (Stakeholder Interviews, 2020). It is estimated that there are between 100 to 120 Please Note: Migrant Stock Bilateral Data from thousand Kenyans residing in the Middle East.[25a] [25b] the World Band and UNDESA does not include data from the GCC. It is estimated there are up to 120 thousand Kenyans in the Middle East.[25a] [25b]

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 15 There is no data available on the prevalence and scale of informal remittance flows from and to Kenya, however, stakeholder interviews suggest that it is commonplace from border countries.

• The CBK does not currently have any data on informal remittance values. Accurate estimations of informal remittances are uncommon. Informal remittance channels include sending money with friends and family; hawala; traders; bus drivers; informal agents; and unregistered/unlicenced operators. By its very nature, data on informal remittances is difficult to collect. Surveys are the only method through which it is possible to form an understanding of the prevalence of using informal across different corridors.

• The CBK has announced, Jan 2021, that it will be commissioning a survey on diaspora remittances as it seeks to increase the inflows' support in development and economic growth. The information will include; the efficiency and cost of alternative remittance channels, difficulties encountered in remitting cash/non-cash transfers, availability of information on investment opportunities for Kenyans in the diaspora and usage of remittances received. Both the Bank of Uganda and Central Bank of Nigeria are collecting data on informal remittances, it is recommended to coordinate so that it is possible to compare across countries and corridors.

• It is assumed, and reaffirmed through stakeholder interviews, that the prevalence of informal channels is higher to and from countries where there are shared borders. For example, there is reported to be high usage of M-PESA person to person (P2P) transfers from Uganda to Kenya, Safaricom's deactivation of roaming facility from Agent handsets did little to deter the practice. Similarly, there are some MTN agents in Kenya border towns offering services to Uganda, although not as prevalent as M-PESA (Stakeholder Interviews, 2020).

• In FGDs in 2018 conducted in the UK, by FSD Africa, with participants from the Kenyan diaspora, all used formal channels to send money home. In the 7 African countries that were involved in the study, the Kenyan diaspora was found to be the most digitised- using online and app base services mostly terminating to Mobile Money and lowest use of informal Services (FSD Africa, 2018).[26]

• Remittance flows have increased since COVID-19, the trends are under continuous analysis hence the extent of this behaviour change this is yet to be quantified. Some stakeholders were of the view that increases were due to informal flows going through formal channels following border and service closures; for example between South Africa to Kenya (Stakeholder Interviews, 2020).

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 16 The CBK currently collects and publishes total remittance inflow data in USD on a monthly basis broken down by North American and European flows and the Rest of the World. It also publishes an Annual Report with a summary of the sector performance.

• The Central Bank of Kenya collects inbound remittance data from reports submitted by all permitted/licensed providers: commercial banks, Money Transfer Operators (MTOs) and Mobile Money Providers (MMPs). This data is only collected in blocs from the send destinations e.g. North America, Europe and the rest of the world by value and volume. This data is published monthly by the CBK and is up to date, latest data available being December 2020 (CBK, 2020a).[28] Monthly remittance data is useful for tracking remittance inflows patterns and identifying seasonal trends.

• The CBK also publishes an annual report with a summary of sector performance which includes a summary of remittance inflows (Stakeholder Interview, 2020).

• According to one stakeholder, the CBK collects a lot of data for AML/CFT and reporting purposes, however it has been suggested that at present the different databases are not comparable, integrated nor interoperable. Apparently, this is something that the CBK is currently working on improving which will ultimately improve supervision and oversight.

• The CBK is currently working on improving their data collection templates and systems from the RSPs and are aiming to be able to provide more level of detail with more analytics by next year. Currently data is only published by region. Also, currently banks do not have to report their inter-bank cross-border account to account to the CBK which means they are not reflected in the remittances data.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 17 Migration and Remittances Priority Policy Actions

• Implement a data strategy that among other functions, enables improved data analytics and generation of market information including disaggregated remittance inflows, outflows, channel usage and estimates of informal flows. Planned amendments to reporting templates could be informed by CBK data needs as well as market needs with the following considerations: o Harmonized templates and reporting across the EAC for consistency to ease eventual harmonization of regulations under the East African Monetary Union (EAMU). o More detailed outflow to the same level of detail as inflow data (above) o Information portals publicly available for easy access to disaggregated inflow and outflow remittance data to inform business decisions. o Access to market share information of remittance service providers to enhance transparency in the market.

• Industry collaboration on CBK's planned diaspora remittances survey launch in Feb/Mar 2021. Recommended collaborators could include: Institute of Africa Remittances, Financial Sector Deepening Kenya (FSD Kenya) and the Financing Facility for Remittances (FFR) at IFAD to maximise opportunities and ensure consistency across countries. This would present an opportunity for Kenya to share remittance best practice with other countries.

• Inclusion of remittance modules in household surveys to understand and form national estimates on the size of the informal market. For example, expanding on the remittance questions in the FinAccess Surveys. Such data would also serve to guide policy decisions and action plans to formalize informal remittances and support efforts to curb illicit flows.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 18 Financial Environment in Kenya

Payment systems infrastructure and payments interoperability

Know Your Customer requirements This section looks at:

• The payment system infrastructure in Kenya that supports the remittances Distribution of access points market

• Identification and addressing systems that are required to access SACCOs, Fintechs and payment integrators remittances and other financial products

• Financial inclusion in Kenya and the use of digital payment instruments Financial inclusion

Mobile Money Usage and Growth

Covid-19 responses

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 19 Kenya has a well-developed national payments system (NPS) to support remittances, however regional payment systems with potential to reduce costs of intra-regional remittances are underutilised. The CBK is reviewing its National Payment Strategy 2021-2025 which outlines measures to enhance Kenya’s global lead in digital payments.

• Kenya has a well-developed national payments infrastructure that enables remittance companies and banks to be able to settle remittance transactions easily and direct money into bank accounts and mobile wallets. Kenya has a Real Time Gross Settlement system (RTGS), the Kenya Electronic Payment and Settlement System (KEPSS) and an Automated Clearing House (ACH), the Nairobi Automated Clearing House (NACH).

• Interoperability between payment channels allows RSPs and remittance recipients to be able to easily move money between different payment channels. Kenya has some-level of interoperability between different payment channels, with Kenswitch, PesaLink (IPSL) and bilateral agreements all enabling the service.

• Mobile-wallets have been interoperable since 2018 through a multilateral approach, rather than a third-party aggregator, offering real time transactions at the same cost as inter-network payments. Kenya does not have a central switch that provides full interoperability between bank accounts, cards and mobile wallets where each has interoperability between themselves. See more information on Kenya’s payment system and interoperability in Annex 2. Despite these levels of interoperability (mostly account to account), the Kenyan market remains fragmented at authentication and distribution levels. For example, Mobile Money, Agency Banking and Merchant services are close looped and agents serve customers from multiple FSPs, through different terminals and pre-funded accounts. The implication for remittances is that customers can only use specified cash out providers thus limiting their choice and Agents end up preferentially partnering with dominant providers as the cost of serving smaller players is higher.

• The CBK is currently reviewing its National Payment Strategy 2021-2025 which outlines measures to enhance Kenya's global lead in digital payments. Facilitating industry-led interoperability emerges as a priority area as do trust, security and innovation.

• The Central Bank has two regional payment and settlement systems to process large value payments: The East Africa Payment System (EAPS) and Regional Payment and Settlement System (REPSS). Whilst these initiatives have the potential to drive down costs of inter-regional remittances (EAPS) and settlement between regional RSPs, usage is low due to low Intra Africa trade traffic, more competitive bank led legacy systems and low awareness. The PanAfrican Payments and Settlement System (PAPSS), developed by the African Export-Import Bank (Afreximbank), and currently under development, is designated to support implementation of the African Continental Free Trade Area (AfCFTA) by enabling cross border trade payments to be made and settled in African currencies (Afreximbank, 2020).[29]

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 20 Kenya has well-established civil registration and national identification systems, where 88% of people have a foundational ID, and is in the process of implementing integrated biometric identification as a next step.

• Kenya has a well-established national ID system, administered by the National Registration Bureau, a component of the Ministry of Interior and Coordination of National Government, State Department for Immigration, Border Patrol and Registration of Persons. About 88% of Kenyans have this foundational credential which is useful for identification, access to public and private services. It is mandatory for citizens aged 18 years and above. The civil registration system issues birth certificates which must be produced when enrolling in schools and applying for an ID or passport.

• ID can be checked through the Integrated Population Registration System (IPRS) national database which is real-time. All licenses financial service providers can access the IPRS upon application and approval by the Ministry of Interior Government through API. The automated fingerprint identification system checks against duplications and multiple entries (Open Society Justice Initiative, 2019).[35]

• Introduced in January 2019, Huduma Namba is an advanced nationwide biometrics registration that is integrated across several public services through an e-government portal. The register is meant to link with other existing government databases, such as the National Social Security Fund (NSSF), National Hospital Insurance Fund (NHIF) and the National Transport and Safety Authority (NTSA). The Government of Kenya conducted a round of Huduma Namba registration from April to May 2019 and indicates 36m people were registered. More recently, the Government communicated that issuing of cards for those registered will commence in January 2021 and the current national Identification card will be phased out at the end of 2021.

• Challenges: There are concerns that Huduma Namba identification contravenes certain provisions of the law including exclusion of currently unregistered citizens, stateless persons and those unable to provide biometrics which may result in subsequent denial of government services (Citizen Digital, 2020).[36]

• Underthe Common Market Protocol, citizens of the EAC can travel within Kenya, Rwanda, South Sudan and Uganda using national identity cards in addition to regional and international passports. Issuance of the East African Passport commenced in 2017 and is expected to develop integrated e- immigration management systems and services (East African Community, 2017).[37]

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 21 The financial services distribution network is extensive and comprises bank and non-bank provider which are mostly concentrated in urban areas.

Financial Service Access Points • Commercial Banks – According to some analysts, Kenya is overbanked. There are 41 commercial banks. The total branch network is 1,401 branches; of the 41 banks, 19 have 59,578 agents under the agency banking model (CBK, 2020d).[38] The competitive market environment and recent restrictions on movement due to COVID-19 pandemic has seen banks investing heavily in digital banking services and encouraging the use of Agents for low value transactions. Bank Agents double up as Agents for Insurance companies and offer cash-in/cash- out services, account opening. Clarification needs to be sort on whether banks’ agents can pay-out international remittances as stakeholder interviews vary.

• Deposit taking Micro finance Banks play a complimentary role to commercial banks, as opposed to being competitors. They offer a vital service channel to the significant proportion of the population lacking access to commercial banks (AMFIK, 2017).[39]

• Mobile Money Providers – There are three Mobile Money providers: Safaricom M-PESA, Airtel Kenya and Telkom Kenya. M-PESA is the market leader of the 3 Mobile Money providers with 98.8% market share; Airtel Kenya’s Airtel Money 1.1% and Telkom Kenya’s T-Kash 0.05% market share all three have a total of 246,1374 Agents (CA, 2020).[40] Equity Bank offers Equitel, a Mobile Virtual Network Operator with a customer base of 1.88 million (Equitel, 2020).[41]

• Microfinance Institutions (MFIs) – Three wholesale MFIs focus on lending to MFIs: Micro Enterprises Support Program Trust (MESPT), Soluti Finance East Africa and Oiko Credit. Of the 34 credit only institutions with a total of 486 fully fledged branches: 230 are in rural areas and 156 in urban areas (AMFIK, 2017).[39] It is estimated that MFIs serve about seven million depositors and close to 1.5 million borrowers (ORCA, 2015).[42] •

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances- Mix Environment Environment Remittance Users Coordination

PRIME AFRICA 22 SACCOs play an important role in providing financial services and are increasingly formalising their operations. Fintechs have made a strong entry into the market heightening product diversity and competition.

SACCOs began as informal savings associations but have formalised their operations in the last decade to include Front Office Service Activities (FOSA), Back Office SACCO activities (BOSA), Digital solution offerings, Agency Banking and card services. The 188 Deposit taking SACCOs are regulated by SASRA while 6,000 non-deposit taking SACCOS are supervised by the Commissioner for Co- operatives. Through their branches, they offer financial service products and are key in expanding reach to rural areas. Following increasing incidents of fraud, SASRA plans to license non-deposit taking SACCOs with deposits of over $2 million (SASRA, 2020).[43]

Fintechs: The Fintech landscape has experienced remarkable growth attributed to the mature payments ecosystem and conducive regulatory environment. Of the estimated 150 fintech start-ups, mobile payments (examples M-changa, Wayawaya, LipaPlus) and lending platforms (examples Tala, Branch, Farmdrive, Okash) and Tanda which makes shops into banking and Mobile Money agents (Nzekwe, 2020)[44] (Tanda, 2021)[45]. See p.38 for Kenyan based Fintechs offering cross border remittance services.

Payment Integrators: The expanding payments ecosystem has led to the emergence of integrators who serve various providers especially merchants to enable them accept various payment instruments. IPSL (PesaLink), Jambopay, Cellulant, DPO and iPay are examples.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 23 Financial inclusion levels are one of the highest in Africa with 8 out of 10 adults formally financially included. This has mainly been achieved through the uptake and use of mobile money wallets (79% of adults).

• Kenya has one of the highest financial inclusion rates in Africa after Mauritius and South Financial inclusion by country Africa with 83% of people formally financially included (FinAccess, 2019)[46] ; 6.1% informal; and 11% excluded. This is largely driven by the high adoption of mobile money.

• The gender gap in financial services usage declined marginally from 8% to 7% between 2016 and 2019 and 5% (91% men and 86% women) for mobile usage way below sub- Saharan Africa’s average of 13%. This is largely attributed to affordability, low literacy skills and where families do not approve of usage (GSMA, 2020).[47]

• Inclusive solutions targeting previously excluded segments such as youth, women, elderly, persons living with disability, low-income earners, MSMEs and Islamic Finance are increasing and bridging gaps. Examples include: fee waiver for transactions lower than Ksh1,000 (USD 10); youth savings products; alternative credit scoring based lending to reduce reliance on collateral-v=based lending; low-value basic accounts, dedicated call centre line serving persons with disabilities and Sharia'h compliant microfinance (CFI, 2018).[48] Financial services usage by FSP type • Financial literacy efforts are paying off, the dynamic nature of advancements in technology, necessitates sustained efforts. CBK, Payment providers and Development partners have typically championed such efforts.. Awareness levels are increasing even amongst bottom of the pyramid and illiterate customers (OECD/INFE, 2020).[49]

• Usage of informal services especially amongst rural dwellers and older persons persists. These include savings groups, and Rotational Savings and Credit Associations (ROSCAs) and Money Lenders (FinAccess, 2019).[46] Source: FinAccess, 2019

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PRIME AFRICA 24 M-PESA is a dominant market player in Kenya's mature mobile money landscape characterized by activity levels of above 50% and 66% of the customer-base using advanced digital financial services.

• Kenya's mobile money ecosystem is mature with intense competition and collaboration between service providers: mobile money, commercial banks, MFIs and Fintechs. Agents 195,854 24,805 2,525 - • Mobile money is the key driver of narrowing the financial services access Active Customers 30,193,833 310,359 13,999 1, 660,000* and usage gap, a conducive regulatory landscape has also been a key enabler. The Market share 98% 1% 0.04% - Communications Authority (CA) reported 30.5 million mobile money accounts in Kenya, P2P/Send Money √ √ √ √ served by over 200k agents (CA, 2020).[50] Cash in/cash out √ √ √ √ 1st Generation Bill Payment √ √ √ √ • M-PESA is a dominant market player with 98 percent market share. Equity Bank Products offers Equitel, a Mobile Virtual Network Operator. Other MNOs offering mobile money in Airme Purchase √ √ √ √ Kenya include Airtel and Telkom’s T-Kash. Mobile Money providers enable remittance Bulk Payments √ √ √ X inflows and outflows. Cross Border √ √ X √ Remiances • Growth in the use of mobile money has been significant with activity rates amongst all subscribers increasing from 51 percent to 71 percent between 2016-2019. Merchant payments √ √ √ √ Digital Lending √ √ √ √ • According to FinAccess (2019),[51] 66% of customers are advanced DFS users Digital Savings √ √ X X mainly determined by uptake of second- generation products such as mobile 2nd Generation Microinsurance √ √ X √ investments, crowdfunding, and overdraft solutions. However, remittance use cases are Products limited, for example users including diaspora customers can only transfer to or receive via Crowd Funding √ √ X X Mobile Money. Investments √ √ X X Bank2Wallet/Wallet2 √ √ √ √ • Diasporans with an M-PESA wallet using roaming services can access all self- Bank service services (those not requiring an agent or merchant). Roaming is not available in Card Soluon √ X X √ all countries e.g. Safaricom has no roaming partner in some markets such as Lesotho. Overdraft √ X X √

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

*Equitel customer base considered bank PRIME AFRICA clients and not counted in MNO market share. 25 Financial Environment Priority Policy Actions • Support transition to full payment ecosystem interoperability across channels: The current situation requires pre-funding of accounts for liquidity management. A national switch would enhance efficiency of settlement mechanisms. This, in turn, would enable operators to free up funds otherwise tied up in pre-funded accounts. A real time cross border interoperable platform integrating national and regional retail payment systems would then be more achievable from this vantage point and could ease the flow and settlement of cross border payments, ultimately reducing costs for both users and service providers.

• Agent interoperability would benefit agents by enabling consolidating different service provider floats into a single account, In future this could possibly be extended to bank agents under Pesalink model .

• Merchant interoperability – a universal Quick Response (QR) code would ensure interoperability but more importantly eliminate the need for Point of Sale devices as both merchants and customers can access it through app based smart phone or feature phones. This would be a significant move towards a fully open, efficient and affordable payments ecosystem driving down costs especially for the poor and informal businesses (FSD Kenya, 2018).[52]

• Identify and leverage opportunities for cross border remittance payment and settlement through regional bloc retail payment systems. The Pan Africa Payment and Settlement system (PASPP) looks promising as it has a Digital Payment module whose usage can extend to remittances (Afreximbank, 2020).[53]

• Open APIs for authentication and verification of e-KYC as currently KYC must be repeated for each service onboarding. This would also expand the number of providers who can safely access this register for e-KYC authentication (CBK, 2020b).[54]

• Advocate for service providers to sustainably make permanent some COVID measures such as reduced fees, expansion of transaction and balance limits.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 26 Regulatory Environment

Overview To engage in cross-border money transfers it is necessary for operators and their partners to operate according to the rules and regulations of the host jurisdiction. Each country has its own regulatory environment. Regulations governing licencing (in terms of Licencing who is allowed to operate in the market); compliance, including anti-money laundering (AML) and combatting the financing of terrorism (CTF) frameworks and know-your-customer (KYC); consumer protection; exclusivity; and, the rules of engagement. Compliance This section presents the regulatory environment pertaining to international remittances in Kenya, assessing whether it is fit for purpose, proportionate, fair and in line with achieving the Other association regulations PRIME Africa goals.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 27 Money Remittance Regulations for providers wishing to offer inbound and outbound remittances are clear and include mobile money providers. Kenya has no foreign exchange control regime; however, remittance provider types are limited, and licensing and approvals may take considerable time.

• The Central Bank of Kenya is the primary regulator governing financial services and formulates financial policies under the Central Bank of Kenya Act (2014). The Central Bank of Kenya Act (2014) is charged with controlling and regulating banking and the financial sector as a whole. The National Payment Systems (NPS) Act No 39 of 2011 preceded the National Payment Systems Regulations (2014). Which provides for the authorisation and oversight of payment service providers, designation of payment systems, designation of payment instruments and Anti-money Laundering measures (CBK, 2014). The Banking Act and its regulations govern the business of banking and related matters (CBK, 2020). The CBK published Money Remittance Regulation in 2013.

• The regulations do not clearly define the entities that are eligible for licensing but outlines those that do not need additional licensing by virtue of their banking license. These are: commercial banks; mortgage finance companies, the Kenya Post Office Savings Bank; the Postal Corporation of Kenya and deposit taking microfinance institutions. Under the CBK Banking Act, the last two entities require an approval from CBK to offer money remittances. This means that there are no restrictions on the type of entity that can offer remittance services, provided they meet the regulatory requirements.

• The regulations clearly outline the application process for licensing and renewal of licences as well as the prescribed form and fees, supporting documents, capital requirements; the conditions on the issuance of the licence including requirements for disclosure of fees and currency exchange rates. Prohibited activities for remittance providers include: acting as authorized gold dealers; lending money; deposit taking; maintaining current accounts on behalf of customers; establishing letters of credit; and acting as custodians of customer funds. The CBK gives a service-level agreement (SLA) of 90 days for approval of new applications, however, stakeholders feedback indicates that approvals take much longer sometimes up to 6 months. Once issued, licenses are valid up to 31st December and renewals must be done 2 months in advance. There is opportunity to issue licenses on a rolling basis and extend term validity.

• Kenya does not have any specific regulation that covers remittance payment hubs, and therefore remittance providers require approvals when launching new products or corridors. Whilst this can cause delays, engagement levels are apparently good.

• Kenya no longer has foreign exchange controls but requires institutions dealing with Foreign Exchange to be licensed by CBK as stipulated in the Banking Act 2014. Exceptions to this rule are Foreigners investing more than 75 per cent in company shares and Kenyans investing more than USD 500,000 who need approval from CBK.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 28 There are 17 licensed Money Remittance Providers (MRPs) in Kenya. IMTOs do not need to be licensed but operate through commercial banks and licensed MRPs as agents.

• Kenya has 17 licensed remittance service providers, 15 are MTOs and 2 are Mobile Remittance Market structure Money Providers.[55] IMTOs such as Western Union, Moneygram, WorldRemit, SendWave etc operate in Kenya through commercial banks and MTOs as agents as IMTOs do not require licensing or approval. CBK was unable to provide a list of the number of IMTOs or sub- agents operating in the country.

• According to the CBK, eligible entities can become sub agents of Banks or MRPs, however, a survey of sub-agents in the market shows that majority are Forex Bureaus and lower tier banks. This is attributed to the stringent AML/CFT requirements set by the IMTOs and Bank Agents. At the same time, IMTOs encourage new participants to become Sub agents for better agent network management as the Banks and MTOs recruiting subagents are responsible for their performance.

• Both Mobile Money providers M-PESA and Airtel are licensed, but Airtel is yet to begin offering services. Licensing MMPs to do cross-border transactions only happened in the last couple of years. Previously, M-PESA had to be an agent of licensed entities (e.g. banks). As  IMTOs do not get licensed, they operate through agents. such, many terminations into wallets still happens through banks.  IMTO Bank Agents only need to seek approval from CBK.

• SACCOs, Mobile Money agents and MFIs do not currently offer remittances directly or as  MTOs need to be licensed to become IMTO Agents or to launch their subagents. According to SASRA, the regulatory body of SACCOs CBK has not found sufficient own remittance products. risk controls for a Foreign exchange business. SASRA is currently building the risk capacities of  Sub Agent agreements between Banks and MTOs must be approved by some of its members in order to become eligible in future (Stakeholder Interviews, 2020). CBK, but responsibility for sub-agent rests with parent bank or MTO.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 29 Following increased incidents of suspected terrorism funding and a rapidly growing financial services market, Kenya has developed a robust AML/CFT framework. In 2015, 13 MTOs were closed until they could demonstrate compliance.

• Kenya has been adopting and developing its AML and CFT policies in cooperation with foreign partners to help tackle and prevent criminal and terrorist organizations from receiving financial aid for their anti-human activity. Closure of MTOs in Kenya over AML/CFT • Kenya is a member of the East and Southern Africa Anti-Money Laundering Group (ESAAMLG) an organization created concerns by 18 African states specifically to implement the FATF recommendations on combating money laundering. • The Financial Reporting Centre (FRC, or the Centre) is a Government institution created in 2012 by the Proceeds of In 2015, following an increasing spate of terrorist Crime and Anti-Money Laundering Act (POCAMLA) 2009, with the principal objective being to assist in the identification attacks in Kenya, the Central Bank of of the proceeds of crime and the combating of money laundering. Kenya closed 13 money remittance providers all • Kenya’s established its AML framework in 2009 and since then has adopted a risk-based approach to AML/CFT Somali-owned over concerns about financing regulations and internal risk-assessments and has issued specific guidelines for mobile payments. See Annex 3 for a terrorist groups like Al-Shabaab. timeline of AML/CFT regulations. • Mobile money balance and transaction limits that were increased from USD700 to USD1500 are still in use. The CBK then issued regulations governing • The NPS strategy 2021-2025 outlines a plan to implement security data analytics for near real-time monitoring of attempted or the operations of the suspended firms and upon suspected fraud, AML/CFT threats (CBK, 2020b).[56] compliance allowed them back to business. This • According to the CBK ‘National Payment Strategy 2021-2025’ cyber threats and fraud were among the two main ensured a new chapter for Kenya's remittance concerns from the industry and stakeholders. providers which has been upheld to date. • Transaction splitting is a key AML concern: Split transactions equivalent to USD 10,000 or below are not permitted in line with reporting requirements of the Financial Reporting Centre as provided under the Proceeds of Crime and Anti- (Business Today, 2015)[58] Money Laundering Act. • The private sector relies on the state for core business functions, such as verifying national IDs to accord with Know Your Customer (KYC) and Anti-Money Laundering (AML) best practices to carry out some private-sector transactions and receive all government services (Caribou Digital, 2019).[57] • Current AML/CFT management protocols are onerous and expensive to manage for example, requirement to screen all remittance transactions regardless of value. Compliance is the highest cost driver in remittance businesses. such costs are passed on to customers thus defeating the cost reduction purpose (Stakeholder Interview, 2020).

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 30 Risk-based CDD is discretionary and applies to various financial products and to all FSPs, banks, non-banks and PSPs, but there are no tiers or thresholds and there are no lower-risk or basic accounts.

• For banks KYC compliance requirements are comprehensive and involve consulting a range of checklists. [60] o For regular accounts, applicants must generally provide an ID and then in certain instances proof of address, M-Shwari - A Case of Tiered KYC source of income and a referee from their previous bank. • M-Shwari is a Digital Savings and lending For non-bank DFS the minimum documentation required is a national ID or passport, which must also be shown at o product offered by Safaricom M-PESA in registration and for all transactions. partnership with NCBA Bank. • Kenya has the Integrated Population Registry Service (IPRS) that banks and PSPs can check IDs against. • An active M-PESA customer can activate M- • Kenya does not have tiered KYC approach given that all account opening requires national ID or passport, however, M- Shwari based on KYC done at registration which Shwari, the digital savings and lending product offered in partnership with M-PESA and NCBA has a tiered KYC model for is a national ID or passport and a completed increased transaction limits [See Box]. See Annex 3 for an overview on Kenya’s Risk-Based Approach to consumer due- application form. • Usage of higher savings limits require the diligence. following additional KYC documentation: • Strict customer due diligence (CDD)[59] guidelines such as requirement for national ID at account opening, without • KSh 250,000 (USD 2,240): Identification options for tiered KYC are exclusive to those who may not currently hold identification for example citizens who are is validated against the Integrated required to provide disproportionately more documentation to acquire national IDs by virtue of living close to porous Population Registry Service (IPRS) borders e.g. in North Eastern Kenya. • KSh 500,000 (USD 4,500): M- • Refugees and asylum seekers use Alien cards which are approved identification types. Shwari customers need to present an original and national ID at a customer • Mandatory requirements for National Identification for Kenyans in the Diaspora to access financial services may service point. exclude a sizeable number who may hold dual citizenship or lived abroad for many years hence not obtaining the ID • Above KSh 500,000 (USD 4,500): which requires physical presence in Kenya's provincial registration offices. Most Diaspora accounts also accept Customers are required to present an EAC/Kenyan Passports and other verification documents. original and a copy of their PIN • Remote onboarding for Financial Services is permitted but must be accompanied by subsequent Certificate at a Customer Service Center physical presence.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 31 Kenya has consumer protection and Data privacy laws that cover international remittances; however, services (especially digital) are not always transparent in terms of pricing, dispute resolution mechanisms are always not clear for digital-based services which undermine trust.

• The Money Remittance regulation sufficiently covers data privacy and consumer protection laws for PSP, Agents and Customers. Clauses include review and approval of sub-agent contracts, confidentiality of customer and user information, prohibition from charging customers fees above those stipulated, openly displaying conversion rates and not advertising free remittances without indication of forex margin charges.

Consumer Protection

• The Kenya Information and Communications (Consumer Protection) Regulations (2010) cover rights and obligations of service provider to consumers; consumers obligations to service consumption; safeguards and guidelines for providing customer service including provisions for people with disability: • the right to receive clear and complete information about rates; • the right to be charged only for the products and services subscribed to; and • equal opportunity for access to the same type and quality of service as other consumers in the same area at substantially the same tariff.

• Regulation 41 of the NPS on Customer Service Agreements stipulates that providers of the service are required to sign customer service agreements with each user that meets a set minimum threshold (CA, 2010).[61]

• In practice, there is not always upfront transparency to customers in terms of all the charges they will incur when using digital remittance services that undermines trust in using these services. Often it is necessary to be a customer or register to be able to view pricing. Furthermore, there are not always clear complaints and recourse mechanisms for digital-based services.

Data Privacy

• Kenya passed the data protection law in 2019 which regulates the collection and processing of data and introduces elaborate obligations to persons who collect and process data. Key clauses include the Establishment of the Office of the Data Protection Commissioner (implemented in Nov 2020); Registration of Data Controllers and Data Processors; lawful, fair and transparent usage of personal data,; Specific provisions for the collection, storage and processing of sensitive data (race, health status, ethnic social origin, conscience, belief, genetic data, biometric data, property details, marital status, family details including names of children, parents, spouse or spouses, sex or the sexual orientation); conditions of transfer of Personal Data Outside Kenya, exemptions and enforcement (Kenya Parliament, 2019).[62]

• Critics have identified gaps in the newly passed law including: Definition of reasonableness in duration of data storage, internationally recognized data protection principles are not fully incorporated, rights of data subjects are not fully outlined and the proposed of the Data Protection Commissioner lacks institutional and financial independence to execute its mandate effectively under the new law.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 32 Kenya has deposit protection insurance in banks, deposit-taking MFIs and mortgage companies. It also requires operating RSPs to hold some funds in an escrow account. Kenya also has taxation of mobile money and has just introduced digital service tax, which will both increase the cost of using digital remittance services.

Remittance / Deposit Protection Agent Exclusivity and Invisible Barriers to • Remittance service providers are required to place a security consisting of either a surety bond, irrevocable letter of credit or Approval insurance bond for KSh 5 million (USD 45,000); it is not clear how this would be used as a non-paying out protection for remittance users. • The money remittance regulation makes no • The Kenya Deposit Insurance Corporation (KDIC) is mandated to protect depositors against the loss of their insured deposits in the unlikely event of failure of a member bank. The current membership comprised of 41 Commercial banks, one reference to Agent Exclusivity; Mortgage Finance Institution and 13 Deposit Taking Microfinance banks. KDIC’s new revised coverage limit is KSh 500,000 however, the National Payment Systems from 1st July 2020. regulation prohibits exclusivity between Taxation of mobile money Agents and service providers. Some licensed providers maintain exclusive • In 2013, the National Treasury introduced a 10% excise duty on money transfer services without adequately consulting industry stakeholders. The taxation policy on these standard transactions has the potential to reverse some of the financial relationships by choice, Some IMTOs also inclusion and overall financial gains as well as incentivizing users to return to cash (Africa Growth Initiative, 2019). offer higher commission structures for service providers to remain exclusive in what are • A Digital Service Tax commenced on 1st January 2021. The 1.5% tax is levied on income earned from services offered through a digital marketplce by local/international individuals and companies. This is likely to affect online remittance referred to as 'Freedom of Choice' services originating or terminating from Kenya as well as other Fintech products. The rationale behind the tax is to level the remuneration models. field for service providers with physical and online presence (KRA, 2020).[63] • Stakeholder interviewed cited invisible Cryptocurrencies barriers to entry both at the point of seeking approval to offer money remittance • In 2015 the Central Bank of Kenya issued two separate clarifications concerning the legal status of virtual currencies, such as Bitcoin. The first one was addressed to the general public and concluded that ‘public should desist from transacting in services and when expanding locations or Bitcoin and similar products. The second document was a caution to ‘all financial institutions against dealing in virtual new corridors. They further indicated that currencies or transacting with entities that are engaged in virtual currencies’ at a risk of ‘appropriate remedial action from the only one Money Remittance institution has Central Bank’ (Didenko, 2017).[64] While there are no immediate plans the revise this approach, future developments (such as the possibility of state-issued ‘official’ virtual currencies) may prompt a revision of the existing regulation. been licensed since 2019.

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PRIME AFRICA 33 Regulatory Environment

Priority Policy Actions

• Foster Transparency in the remittances market especially for mobile and digital services through improved disclosures of all pricing (fees and FX rates) provided live on company websites for non-customers to view. Create more awareness around credible price comparison sites targeting the Kenyan remittance market.

• Expand remittance providers licensing categories to ensure even distribution of access points, improved access and choice. As an example, Forex Bureaus who are highly liquid mainly offer remittance services as sub agents but have capacity to become full agents. Product based licensing compared to service provider licensing would ensure products suitable for the market are licensed, this especially applies to Fintechs.

• Consider publishing the CBK’s tracking system for licensing and new product/corridor approval service level agreements. A tracking system would ensure service providers can adequately plan their market entry.

• Review taxation on mobile money and digital services. An impact assessment can be conducted to determine correlations with informal channels.

• Deployment of relevant Regtech and Suptech technologies would ease supervision in the expanding digital payments ecosystem, additionally, financial service providers would be able to efficiently and cost effectively manage compliance.

• Facilitate awareness and customer education on dispute resolution mechanisms, cybersecurity and fraud to enhance trust especially for digital products

• Open API for authentication through IPRS and once Huduma Namba registry is accessible, authentication for providers with biometric functionality.

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PRIME AFRICA 34 Remittances Market Structure

Market Structure and Value Chains

Pricing and Transparency This section looks at the remittances market structure, looking at: the structure and competition in the main send-markets; the pay-out networks in Kenya; and, for outbound remittances. The cost of sending money to Kenya is assessed, drawing out Access some cost drivers that have been identified, and finally insights into access to services. First Mile: market structure Informal Channels

PRIME Africa Corridors

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 35 The structure of the Kenyan remittance landscape varies according to the different migration profiles. It is a highly digitized market driven by high financial inclusion rates and prevalence of mobile wallets. More than half of all remittances are terminated into M-PESA wallets and over half of transactions are channeled through Equity Bank. • There is no publicly available information on the structure of the remittance market into or out of Kenya. There are 17 MTOs licensed in Kenya that can offer services, the post office, and 41 commercial banks and deposit taking MFIs (CBK, 2020e).[66] However, given that IMTOs do not need to be licensed to operate in Kenya, but can partner with licenced entities, the number of IMTOs offering services to and from Kenya is unknown. Furthermore, the prevalence of informal, unregistered service providers is also not known, although one stakeholder suggests that informal remittance inflows into Kenya could be as much as USD1bn.

• Stakeholder interviews indicate that the choice of remittance service and market structure varies between geographies, corridors, type of migrant, legal status, age of senders and receivers and income/education levels. For example, younger, more educated Kenyans are more likely to use digital services.

• M-PESA, with 98% market share reported revenues of USD 11.8 Million from M-PESA Global in 2019, with the unspecified volume remittances contributing more than 50% of all inflows to Kenya. Further reinforcing M-PESA's dominance in Kenya. (Safaricom, 2020).[67] It is estimated that 30% of inflows are cash outs and 10% is paid into bank accounts (Stakeholder Interviews) Source: Stakeholder interviews, 2020

• Equity Bank processes about 50% of inbound remittances into Kenya due to its last mile distribution capabilities (USD1.6 billion in 2020). With a customer base of 11 million account holders, 175 branches and 38,000 agents, Equity Bank acts as an aggregator in the market offering IMTOs the termination into own and other bank accounts, through Agency banking agents and into mobile money wallets (mainly mPesa). 90% of Equity remittances are terminated to digital channels (Stakeholder Interviews, 2021).

• Stakeholder Interviews further identified a tendency for full cash-out of remittances received however, this pattern shifted at the height of the Covid-19 pandemic movement restrictions, there has been a marked increase in digital usage. Remittances received from MTOs are typically cashed out at Sub agent Forex bureaus, MTO outlets or bank branches offering MTO services. Liquidity is reportedly a challenge for paying out international remittances at mobile money agents. The preference for cash introduces a cost to access layer, which is higher for more rural remittance recipients.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 36 Remittance value-chains to and from Kenya involve a number of players, including the sending party, banks or international remittance aggregators, a licenced entity in the receive market and pay-out sub-agents. Digital remittance services should be much more streamlined that traditional cash-based that rely on partners and pay-out agents.

3rd Mile – Receiving 1st Mile – Sending 2nd Mile – Processing

Sending Payment Sending Networkz Receiving Receiving Payment Channel Method Provider /Hub Provider Channel Method

• MTOs • RealTime system • MT agents • Cash • In-person, branch • Cash • MT Agent • Digital IMTOs • SWIFT • Banks • Payment Card • Online • Payment Card • Mobile Money • Banks • Correspondent Bank • MMPs • Bank Account • Mobile • Bank Account • Bank • MMP • Aggregators • Fintechs • Mobile Money Account • Call Center • Mobile Money • Informal • Payment Cards • Payment Cards Money Account • Fintech (Mobile App/Web) • Informal (in-person, phone, bank transfer)

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 37 In Kenya 41 commercial banks, DT MFIs, the Post Office, 17 money remittance providers and two MMP have direct license to offer inbound and outbound money transfers. IMTOs partner with these entities and pay-out via own networks and sub-agents mainly forex bureaus and lower-tier banks.

Contracted by Banks and Licensed under Banks CBK Direct Licence MTOs

IMTOs offer remittances through Banks, DT MFIs and MTOs

Fintech and Online Banks and DT MFIs Money Transfer Operators MoMo Providers Sub Agents Providers

• Banks offering x-border services MTOs have very distinct characteristics: • M-PESA Global offers send • Mostly Forex Bureaus and • Include web/App based through SWIFT, EAPS etc Dhahabshil, Tawakal, Juba Express etc. have and receive through lower tier banks who are sub and online services such • Ecobank (Rapid UK, UAE, USA, Somalia and South Sudan as key partnerships with 25 entities agents of Banks and MTOs. as PesaBase who partner Transfer), UBA (Africash) and Postal destinations. Close to 90 percent of these are including Aggregators and • Form the bulk of remittance with banks in Kenya to Service (PostaPay) have own remittance Somali owned businesses, have their own IMTOs enabling send and outlets but are not listed in offer remittances and products remittance payment platforms, international cash receive to 167 countries. CBK count. small-scale trade flows but • Most banks are agents of out networks and are heavily cash focused • Airtel Money licensed but • MFIs include Uwezo, SMEP, have received full licensing IMTOs: Western Union, MoneyGram, RIA, offering no digital send or receive currently not offering Kenya Women’s Finance in other jurisdictions e.g. World Remit, SendWave and Xpress channels. Combined they have 52 agents with services Trust. Australia. Money (Unimoni). DTB Kenya has a 46% in Nairobi. See Annex 8. • Equitel is a payout partner • There are 76 forex bureaus banking hall dedicated to remittances Others such as Flex, Upesi, and Mukuru MT are for Juba Express. in Kenya, not sure how • Banks offer SWIFT also to send and more digitally focused. many are agents of IMTOs. receive services (e.g. KCB, Equity etc) that focus on diaspora and remittances

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 38 Postbank Kenya and Postal Corporation of Kenya Cross border remittance profiles

Kenya Post Office Savings Bank (KPSBP) also known as PostBank Kenya • Postbank Kenya is a special type of bank regulated by the Kenya Post Office Savings Bank Act Cap 493B and primarily engaged in the mobilization of savings for national development. It does not offer the full suite of banking services but is permitted to offer cross border remittances. • In practice Postbank, intensively supported by WSBI and others, advances through partnerships in microfinance and digital banking and involving many types of agents. • Remittances: Postbank offers remittances as an agent of IMTO's including Western Union, MoneyGram, Ria Money and Express money who leverage its extensive distribution network of 98 branches especially in rural areas (KPSBP, 2021).

The Postal Corporation of Kenya (PCK) • PCK is also known as Posta and is a state-owned enterprise that provides accessible, affordable and reliable postal services countrywide. Its scope includes Communication, Distribution and Payment solutions through its network of 623 branches in 10 regions (PCK, 2021). • Posta has notably implemented a fully interoperable payments switch for processing third party small value payments for any local bank, channel or payment instrument, and is linked to the RTGS. However, 50% of the post offices are not connected to the switch (The Standard, 2020). • Own Products offered include Posta Pesa, Posta Pay individual and institutional domestic money transfer services. • Cross Border Remittances: Posta is a sub agent of a commercial bank which offers IMTO services including Western Union, MoneyGram and RIA. • Posta offers agency services for most commercial banks, Mobile Money providers, MicroFinance institutions and collects and disburses payments for e-government and state- owned enterprises such as Water companies, Telkom Kenya etc. (PCK, 2021). • Other innovative initiatives include disbursement of Government to Person (G2P) cash transfers, virtual postal addresses linked to mobile numbers and has entered into a distribution agreement with Jumia (Standard Newspaper, 2020).

PRIME AFRICA 39 Whilst market share data for companies is unknown, the type of services and operators used vary by geography, corridors and the profile of migrants. Whilst there is no official data, interviews suggest SendWave and WorldRemit are the largest senders of remittances into Kenya globally. Middle East (Inbound)

• Regional IMTOs incl. Dahabshiil, Transfast • Hawala • Mobile to mobile incl. c to M- PESA (Qatar)

North America and Europe (Inbound) Intra-Africa (Inbound and Outbound)

• Traditional IMTOs incl. Western • M-PESA agents acting as unregistered agents in the send- Union, MoneyGram, Ria, Express countries (significant market share for neighbouring countries) Money etc • Informal through buses and traders (neighbouring) • Online and app-based IMTOs incl. • Informal: Hawala (esp. from Somalia ) WorldRemit and SendWave (significant • Kenya-registered MRPs, incl. Dahabshiil, Upesi, Tawakal, Flex etc. market share), SimbaPay etc. • Pan-regional banks especially for white collar, higher-income • Banks via SWIFT workers and larger values (Equity, KCB etc) • IMTOs and pan-African MTOs • African FinTech – small but growing, including ChipperCash, Eversend.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 40 At 7.5% of the send amount, the average cost of sending remittances to Kenya is above the SDG recommended 3%, but lower than the average cost for SSA 8.5% and other intra-Africa corridors. There are low-cost services from many of the largest send-markets where competition is more intense.

• The average cost of sending remittances to Kenya is 7.5% of total send amount, • It is important to consider that average costs are not always reflective of what which is marginally lower than 8.5%, the average send fee for SSA and global rate people are actually paying to send money home. of (RPW, Q4).[71] It is also significantly lower than several African countries with lower • For example, in high-volume corridors (such as UK and USA) SendWave offers volumes of remittance inflows. services for 1.2% and 2.7% of the send amount to send USD200 equivalent. • On average, it costs more to send remittances from other Africa countries, Uganda to Kenya cost 1% of the send amount with Western Union, and Germany including Tanzania, South Africa and Rwanda, than from Germany, Canada and USA. to Kenya cost 4.5% with WorldRemit and 0.1% with Remitly (see Graph on p43)

Average cost of sending USD 200 within Africa (USD)

Senegal

Ethiopia

Kenya

Tanzania

Rwanda

Uganda

Malawi

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Source: RPW Q4 2020

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 41 There is low transparency in Kenya (as in many other countries) on the range of remittance services and the total cost of sending / receiving money. Whilst transparency is mandated by the Government, full disclosure on total costs to non-customers is often unavailable.

• There is poor transparency on remittance services and costs of using remittance services in Kenya. The CBK outlines in regulations that service providers must be upfront about costs ahead of transactions.

• Challenges:

1. This is not always adhered to by operators (see screenshot) where the fee is not always clearly disclosed to the customer.

2. It is necessary to have a local mobile wallet and a recipient telephone number to check prices. As such comparing prices across service providers is challenging.

3. The amount received in the transaction sent was less than the amount stated upfront. Additional charges that had not been disclosed were incurred.

4. Cash-out fees are not disclosed.

• Fees and FX margins make cross-border remittances difficult to compare and contrast. This is further exacerbated with mobile money where there are also cash-out fees to consider making understanding the real cost of using mobile money services challenging to the consumer, which will be driving use of informal channels.

• The graph on costs of sending money to Kenya from different send-countries by different operators, clearly demonstrates the variation in costs even between large well-known operators. Whilst Western Union is relatively expensive from Germany and UK, it is one of the most competitive services from Uganda. Operators can change their pricing daily based on the FX rate offered, and as such a competitive operator one week may not necessarily be the next.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 42 Digital channels are driving down remittance costs although full impact is yet to be realized as players set up cross border integration partnerships. It is possible to send remittances mobile-to-mobile wallet to 7 other African countries from Kenya, and it is possible to receive remittances mobile-to-mobile from 6 countries, making it one of the most integrated globally. • It is not clear why services made over the internet are so high (averaging 7.6% • Mystery shopping conducted in Q4 2020, suggest that the cost of sending money of the send amount). Services’ that offer cash-in/cash-out services via agents prices to Kenya using mobile have reduced from Uganda and Rwanda significantly can in part be explained by the commissions paid to agents. Average online services since Q2 2020 when the average cost was 7.1% of the send amount. This trend is from South Africa and Uganda are especially high. See Annex 10 for further analysis encouraging and demonstrate that there is room to improve efficiencies and align of pricing into Kenya. costs to the SDG recommended levels of 3%. • Safaricom has standard pricing agreements for aggregators and MTOs, that are • Even at 5.3% of the send amount to send USD200 to Kenya using mobile, this is dependent on volumes ranging from USD1.5 to USD0.5 per transaction. still relatively expensive compared with other mobile-to-mobile services globally. International aggregators usually take a fee per transaction ~$0.25 / 1.5% There It is not clear why the cost to send money mobile-to-mobile to Kenya (and from) is needs to be consistency in the cost reductions over time to build trust with more expensive. Additionally, mobile money attracts an additional 2-2.3% cash-out fee consumers. Fees and FX margins should be publicly available on the MNOs website from an agent or similar amount in transaction fees for using e-value instead, for overtime, so that customers can understand the variations in costs and compare like- example for P2P and bill payments etc. for-like across service providers. This should be mandatory within licencing agreements. Average Cost of Sending USD200 equivalent using Mobile-to-Mobile cross-border remittance services to different recieve- countries (GSMA, 2020)

Zambia 7.8% Uganda 4.4% Pakistan 1.5% Nepal 3.2% Malawi 2.2% Kenya 7.1% India 1.7% Receive Market Receive Morocco 2.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% % of the send amount

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 43 Access to international remittances in Kenya is among the best on the continent with a good distribution of MTO agent locations and mobile money agents where funds have been received into wallets.

• Kenya has the sixth largest physical pay-out network of agents in Africa (using Western Union and Number of Agents agents Population per MoneyGram agents as a proxy). In Q2 2020 there were 3,745 separate WU and MG agents, which is Population equivalent to 7 per 100,000 people. (WU & MG de- (100,000) 100,000 duplicated) people • Furthermore, Kenya also have the largest and most established mobile money agent network in Africa (nearly 250 thousand agents) and most RSPs offer international remittances to be terminated into Gambia, The 1085 2,347,706 23 46 or initiated from mobile wallets, which can then be CICO at mobile money agents. Ghana 2648 30,417,856 304 9 • The bivariate map shows the underserved areas in Kenya with respect to money transfer agents Kenya 3745 52,573,973 526 7 (not including mobile wallets). It is evident from the map that, the majority of people are well served in Rwanda 717 12,626,950 126 6 Kenya, where only areas with relatively low population density have a long way to travel (those coloured Nigeria 6310 200,963,599 2010 3 light purple). Uganda 1043 44,269,594 443 2 Population in reach of a money agent in Source: World Data Lab data scraping for PRIME Africa Money Agents and Population Kenya. 12.9 million Kenyans do not live within Population in reach of a money agent in Density in Kenya a 10km radius of a money agent Kenya

X Axis: Population density; Y Axis: Distance to agent

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 44 Anecdotally, the use of informal channels to send and receive money to/from Kenya is high, especially within the East African region. Hawala service providers are also prevalent, although many of the Somali hawala providers are registered as MTOs in Kenya.

• In Kenya, informal channels include: Physical transfers through friends and family, Transport and Courier companies, Migrant Associations, Forex Bureaus not licensed to carry out cross border cash transfers, Retail outlets, unlicensed online money transfer apps, Hawala and Hundi systems. Informality is mainly driven by: limited availability and accessible formal remittance channels; high prices; unreasonable KYC requirements ; familiarity and easier access and usage of informal channels (GSMA, 2018).[72] In other cases, informal channels are used for money laundering, to transfer proceeds of or to fund illegal activities.

• in Q1 2021, the Government of Kenya plans to conduct a survey with the aim of understanding the prevalence, use and costs of informal service providers.[73] This survey will be conducted in Feb/Mar 2021 by the CBK in partnership with the Kenya National Bureau of Statistics (KNBS), the Ministry of Foreign Affairs (MFA) and other stakeholders. The targeted information includes efficiency and cost of alternative remittance channels, difficulties encountered in remitting cash or non-cash transfers, availability of information to Kenyans in the diaspora about investment opportunities in Kenya and usage of remittances received. The survey provides an opportunity to gain evidence- based insights on the prevalence of informal channels.

Hawala • Most outbound transactions to Somaliland and Somalia are sent via Hawalas. Notably, a review of Hawala agents operating in Somalia e.g. Dhahabshil, Tawakal and Amal (CALP, 2012)[74] shows the same agents are formally licensed in Kenya and other East African countries. This could be attributed to the regulatory vacuum in Somalia and indicate a high possibility of self-regulation. • Hawala are informal money transfer companies that transfer funds both domestically and internationally. This type of system was originally developed to facilitate trade between distant regions where conventional banking institutions were either absent, weak or unsafe. • Hawala money transfers typically weave in and out of formal channels. For example, The Somali Canadian Education and Rural Development Organization (SCERDO), indicated that "Somali citizens can receive their Hawala remittance through their mobile phone" (SCERDO, 2015 quoted in RefWorld, 2015)[75] and “Hawala organizations collect funds from Somalis living abroad and contract with agents on the ground in the country, who use mobile phones and email to transmit money to the recipients" (WPI, 2014 quoted in RefWorld, 2015).[75]

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 45 The main informal channel used within the region is via registered and unregistered M-PESA agents residing in other countries and offering cross-border money transfer and cash-in/cash-out services.

• With the rise of mobile money, and particularly informal service providers who make MPESA (from Kenya) and MTN (from Uganda) more available to users on both sides of the border, the transaction costs have dropped well below the cost of carrying cash. Informal MPESA services are freely available in Uganda through registered and unregistered agents, and MPESA users can transact while roaming. • MTN users’ lines switch off after 1 month of roaming in Kenya, which leaves customers to either rely on an MPESA agent back home or one of the relatively fewer informal MTN agencies in Kenya.

• MPESA/MTN (UNREGISTERED) • Dual agent in Uganda with formal MTN and informal MPESA (i.e. no agent number) through dedicated personal lines (i.e. agents transact on behalf of customers). These agents are used for sending money both ways because they’re ‘interoperable.’ Located throughout Uganda and pass on informal forex rates from money changers (+/-.1- .5 UGX). • MPESA/MTN (REGISTERED) • Dual agent in UG operating formal MPESA (i.e. with agent number) through fiscal relationship in Kenya. A Kenyan partner registers the agency to a Kenyan bank and address, but places the kiosk in Uganda. Like the unregistered version, a co-located MTN agency makes it ‘interoperable.’ Operate on the border and pass on informal forex rates (+/- .1-.3 UGX).

• While not formally licensed, MPESA in Uganda facilitates ‘interoperability’ both ways. The prevalence of both registered and unregistered MPESA agents in UG facilitates both sending and receiving across the border, and this is critical to driving informal preferences. Kenyans in Uganda can easily send money home or cash out by MPESA. Ugandans in Kenya can build a relationship with an agent in Uganda near their family to send money home. • Challenges are: whilst these roaming agents offer formal channels, they are not legal. There is no KYC conducted on the sender and often there will be fake ID used to process the transaction.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 46 PRIME Africa will focus programme activities in three inbound remittance markets to Kenya, including Germany from the EU and intra-Africa, Uganda and South Africa.

• The Central Bank of Kenya (CBK) publishes monthly remittance inflows by three regions: Europe, North America and Rest of World (including Africa). According to CBK, 17% of their remittances so far in 2020 have come from Europe, which includes EU countries, but also includes the UK, their 2nd biggest remittance sender.[78a]

• Reflecting where their diaspora is, Germany, Sweden and Italy are the three largest send markets from the EU sending USD94mn, USD23mn and USD 22mn respectively.[78]

• Uganda and Tanzania are the top African corridors remitting to Kenya, with each country being responsible for approximately 7% of Kenya’s total inflows and close to USD200mn. South Africa and South Sudan also remit USD109mn and USD30mn respectively. Despite having the 6th largest Kenyan diaspora, Mozambique is not a top remittance corridor for Kenya.[77]

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 47 The average cost of sending money from Uganda to Kenya is 4.1% of the send amount. However, stakeholders suggest that the Uganda to Kenya remittance corridor is still predominantly informal with transfers made through unapproved M-PESA agents. These services may even cost more than formal mobile-money transfers, but customers are willing to pay a premium for the trusted service.

• Uganda hosts an estimated 36,822 Kenyans, representing 7 per cent of the Kenyan diaspora, the largest intra- African migrant population from Kenya (UNDESA, 2019b).[79] • According to World Bank estimates, a total of USD 2,719 in remittances was received in Kenya in 2018, 7 per cent of this (USD 191m) was received from Uganda.[80] The CBK does not report it as a top corridor into Kenya through formal channels, however, the FinAccess Survey 2019 suggests that 9.2% of Uganda’s remittances come from Uganda (the 2nd largest send-country after the USA). The survey does not distinguish between money sent through formal and informal channels. • Uganda has a diverse range of remittance players, with remittances to Kenya using MTOs such as Dhahabshil, Tawakal, Amal, Bakaal etc. who have presence in both countries, regional banks that offer competitive services, such as Equity, KCB and EcoBank, and formal mobile-to-mobile services are also available through MTN and Airtel to M- PESA, Western Union offers a competitive service at 1.2% of the send amount. • However, interviews suggests that the Uganda to Kenya Corridor has a strong informal remittance presence where M-PESA account holders offer unlicensed services to send funds to registered M-PESA users in Kenya through a person-to-person transfer leveraging the East African roaming agreements in the region. Source: RPW Q4 2020[81] • The average cost of sending USD 200 from Uganda to Kenya is 4.1% of the total amount making it one of the most competitive send corridors to Kenya. • Banks and MTOs are the most competitively priced. • Funds can now be sent from MTN Mobile Money to M-PESA, however, whilst this makes it easier it remains to be seen how this service will compete with roaming agents that are formal but illegal. • There is currently no place for Kenyans living in Uganda to understand and obtain information on the relative costs of the different service providers. There may be a perception that informal services are cheaper.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 48 Kenya's diaspora in South Africa is relatively small with a mix of formal and informal migrants. Stakeholder interviews portray a growing corridor since COVID-19. Notable usage of informal channel includes Hawala traders and routing money through Botswana to avoid foreign exchange controls.

• In 2018, a reported 28,769 Kenyans lived in South Africa, representing 5 percent of total emigrants. • According to data from the CBK (author’s own calculations), in 2020 remittance inflows from South Africa summed to USD195 million, representing 6% of Kenya’s total inflows.[82] This suggests that the average annual remittance for each member of the Kenyan diaspora in 2020 was USD6,800. According to the CBK, remittances from South Africa to Kenya dropped from 10.8% of inflows in Q1 2020 to 0.9% of inflows in Q4 2020. • South Africa has foreign exchange controls with stringent KYC requirements such as proof of address, proof of income etc. The emergence of Fintech led MTOs such as Hello Paisa and Mama Money shifted the monopoly by banks and MTOs. The entry of Mukuru MT into Kenya and Uganda is also expected to ease the transfer of funds from SA into these markets. • Mobile money failed to scale in South Africa due to high levels of bank driven financial Inclusion (93% second highest in SSA).[83] Re-entry of MTN Money and Vodacom M-PESA coupled with a more conducive regulatory environment lowering dependency on banks show a more positive outlook. • Informal services are driven by the high send costs and foreign exchange controls and include sending through traders. • Stakeholders reported significant growth in volumes since COVID-19 an indication of the possibility of informal flows being routed through formal channels. For example, Hawala Source: RPW Q4 2020[84] providers and traders using Kenya as a transit hub to China, Somalia and the Middle East. Transaction values notably increased from the average USD300 per month. According to South African Reserve Bank (SARB), Authorised Dealer with Limited Authority (ADLA) licensees are not At 10.7% to send USD 200 (Q4, 2020) to Kenya, South Africa allowed to send trade flows. has one of the highest average send fees in Sub-Saharan Africa. IMTOs Western Union and MoneyGram charge more while • Stakeholders anecdotally indicated that Kenyans send money home through Botswana to avoid new entrants Chippercash, HelloPaisa and World remit have more exchange controls in South Africa (Stakeholder Interviews, 2021). competitive rates.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 49 The Kenyan diaspora in Germany is the largest in the EU, however, it is still very small with 14 thousand people. Whilst average costs are relatively high at 7.7% of the send amount, online operators such as WorldRemit and SendWave have much more competitive pricing around 3% of the send amount.

• Germany has the largest Kenyan diaspora in the EU with approximately 14,000, of Kenyan migrants compared to other EU countries hosting an average of 5,000. According to the CBK, Germany is the largest send market from the EU, with remittances valued at USD89 million in 2020, accounting for 3% of Kenya’s total inflows. According to the FinAccess survey 2019, Germany was the fifth largest remittance sending country to Kenya, with 6% of remittance receiving households receiving money from Germany, on par with the UK.

• The average cost of sending USD 200 from Germany to Kenya is 7.7%, which is one of the highest from the EU. US-based fintech Remitly is the lowest priced, charging no fees and levying low FX margins (0.1%), and WorldRemit offers 3.5% and Wave also offers competitive services. Given the small remittance volume, this is not a competitive market and is not a focus for many of the operators.

• The use of online financial services and digital payments is less in Germany than other peer EU countries, with focus groups with other African diaspora citing challenges with trust. The awareness, trust and uptake of online digital services is not Source: RPW Q4 2020[85] known in this corridor.

• IMTO Western Union is particularly high both via Postbank DE, cash and card. EcoBank’s RapidTransfer is also offered from Germany.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 50 Market Structure Priority Policy Actions s • Review pricing and cost structures of cross-border remittance services, especially digital, and ensure they are efficient in alignment with the Draft National Payment Strategy 2021-2025. Given M-PESA's dominant position in the market and as the main pay-out partner of international remittances, enhance market competition, efficiency in cost structures and consumer protection to enhance choice.

• It is recommended for cross-border remittances pricing to be transparent upfront and available online. It is recommended that there is full discloser on pricing, especially for mobile incl. displaying cash-out fees. Fees and FX margins should be publicly available on the MNOs website overtime, so that customers can understand the variations in costs and compare like-for-like across service providers. This should be mandatory within licencing agreements.

• Streamlining mobile money remittance value chain – encourage operators to ensure they have the most appropriate solution for them. May not always be through an aggregator.

• Address the conversion of formal channels to informal usage in other markets and decide whether to / and what action to take. For example beyond disabling Agent till roaming facilities, what other actions can be taken to deter unauthorised M-PESA usage in Uganda? MTN Uganda deactivates roaming services after 1 month.

• Review whether support is required through the Remittance Association to support cash only MTOs to digitise and assist with integration to mobile money. This is especially the case for Somali-owned MTOs that are cash-based.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 51 Financial Services for Remittance Users

Financial services for diaspora Aside from being a movement of money from a sending country to a receiving country, remittances also have the potential to be a catalyst for financial inclusion. A number of entities offer diaspora and remittance linked products in Case studies of innovation Kenya.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 52 Kenya has high levels of financial inclusion in terms of account ownership. However, there are opportunities for remittances to further drive usage and increase connections between payment channels and financial services. The Kenyan banks offer a wide range of diaspora-related financial services, but Kenyans abroad can also access domestic products and services.

• In many countries, international remittances are the first interaction that people have with formal financial services and therefore remittances have the potential to drive domestic formal financial inclusion. Kenya does not have the same need to drive financial inclusion through international remittances as it is estimated that 50-60% of international remittances are terminated into mobile wallets (p.38). Kenya has high-levels of financial inclusion (~80% of the adult population) with an impressive 66% of consumers using advanced digital financial services. However, there are still opportunities to drive usage of financial services through international remittances. • Kenyan diaspora with mPesa wallets have access to all of the financial services that can be accessed remotely whilst residing overseas. • Whilst it is estimated that only 10% of international remittances are terminated into bank accounts in Kenya, Kenyan banks have also developed products specifically for the Kenyan diaspora to attract savings, investments and insurance. A key stakeholder suggests that remittances sent to bank accounts are predominantly for investment purposes and to access additional products. • Additionally many Kenyans have domestic bank accounts and financial products, despite residing overseas. Equity Bank in Kenya does not only monitor designated diaspora-owned accounts but also uses its core-banking, know-your-customer guidelines, combined with the country code or the telephone number attached to the account to identify an account as a “non-national” or “diaspora account”. The bank then tracks the balance sheet of these accounts, looking at transactions, deposits and loans. In relation to remittances received through Equity Bank at approximately USD 3.5 million per day and over 25,000 transactions, the balance sheet of diaspora-linked accounts is low at 30,000 accounts and USD 35 million in loans and USD 45 million in savings (2019) (Stakeholder interviews, 2020). • The Kenyan diaspora is well-organised overseas (see IOM, 2017: 25 for list of organisations) and has ‘Kenyan diaspora SACCOs’ offering them savings, credit and helping them to invest in Kenya. • In relation to financial services for remittance users, in Kenya the opportunities are to develop additional products that meet the needs of the diaspora and remittance receiving households, for example including using remittances as collateral for credit / loans, investment products for the diaspora, products that give senders more control of their funds, interest on mobile money to incentivise a culture of saving. Improved financial literacy among remittance beneficiaries will assist people to use the products available in an optimal way. • In 2017, the IOM under the ACP EU, published the ‘Send Money and Invest in Kenya Guide’ for the diaspora offers information on how to send remittances, the main operators, diaspora banking services including investments. See Guide.[86]

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 53 Kenya financial service providers offer a diverse range of diaspora-focussed financial products. There are not many products focused specifically to remittance beneficiaries.

Product Category Offered by Key Features Enrolment Requirements

Diaspora Savings and Equity Diaspora Self-Service Portal, one of the Eazzy Banking self-service tools, for Current Accounts for account opening and management, stock trading and Insurance for families at Businesses and home. Individuals NCBA Homeward product offers lending, insurance, investment and money transfer with 6 Passport or National ID, Proof of partners Address, KRA PIN certificate – all KCB Offers Diaspora Mortgage, Diaspora Investment, money transfer and Insurance- notarized emergency medical cover, personal accident, inbound travel as well as Death and HF – Letter of introduction from an funeral cover. Has agents abroad to assist with account opening. existing account holder, employer or bank Coop Offers accounts, investments, mortgage financing and money transfer with 7 partners Mortgage HF • High interest savings account • 100% mortgage financing

Pension and Social LapFund Savings and Retirement Fund, Survivor Benefit and pension backed mortgage National Identification, minimum USD Security Funds 100 contribution monthly

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 54 Continued...

Product Category Offered by Key Features Enrolment Requirements Money Market Fund, Fixed Income Fund, Equities Fund, Diaspora Investment Fund: African Property Fund and Business Growth Membership-based Diaspora Asset Managers (ADAM) Fund. Payments via VISA cards, bank accounts and MPESA

Diaspora Investment SACCO / Kenya Savings , credit, real estate development, Investments Diaspora SACCO / Kenya Qatar Diaspora Membership based investment opportunities (KQD) SACCO

Money Market and Fixed Income Wealth Britam Copy of ID/Passport, KRA Pin Certificate management Investments in real estate, unit trust, Cytonn Utility Bill, Copy of Bank Statement pension and structured products Emergency medical cover, personal Insurance: Health, Life, Asset KCB Diaspora account accident, inbound travel as well as death Passport or National ID and funeral cover.

• An example of remittances as collateral in Kenya - The Commercial Bank of Africa (now NCBA) and Safaricom (a mobile network operator) launched M-Shwari in November 2012, making it the first mass digital credit service in Kenya. NCBA develops a credit score for M-Shwari customers by leveraging information moving through the M-PESA system. This means that for international remittance customers using M-PESA to send and receive remittances, their transaction history increases their credit score in order to access credit.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 55 Equity Bank and Kenya Commercial Bank provide two examples of innovation in diaspora financial services. Kenya is a global leader in financial services for the diaspora. Equity Bank Kenya Commercial Bank (KCB) Launched in 2018 under the Eazzy Banking umbrella, Equity has introduced several self-service digital tools, KCB Diaspora Banking Unit was launched in 2012, initially offering a namely: EazzyNet, EazzyPay, the Eazzy Banking App, EazzyBiz, Eazzy Save, Eazzy Chama, and the range of accounts (including current, transactional, student and junior Diaspora Self-Service Portal.[92] [93] accounts); mobile banking; and loans, mortgage and investment products.[98] In Q3 2020, 98% of transactions took place outside Equity branches, with 83% conducted through mobile and internet banking.[94] Known for digital services innovation, Equity Bank was awarded the title of Africa’s best In order to help diaspora manage risk and avoid financial losses, KCB digital bank for both 2019 and 2020 in the Euromoney Awards for Excellence.[95][96] has subsequently developed a series of insurance products marketed under the KCB Diaspora range, including a Death and Funeral Cover Kenyans are not limited to using Equity’s designated diaspora-owned accounts while abroad but can access all and inbound travel insurance for emergency medical and personal financial services and manage these remotely. The Eazzy Banking App allows users to access all normal bank accident cover during visits to Kenya. The Death and Funeral Cover services including sending money and paying for goods, services and bills. It incorporates fraud-combatting encompasses the repatriation of remains; burial and coffin expenses; measures through biometric fingerprint access control and one-time passwords to authenticate transactions. the cost of accompanying family members; and funeral expense benefit Similarly, Eazzy online banking provides a one-time PIN to registered mobile numbers to verify the transaction for 4 named dependents. In order to be eligible for these insurance is authorised.[97] products, the policy holder must reside abroad; hold a valid Kenyan passport or ID; have a KRA PIN certificate; and provide a notarised Equity’s Diaspora Self-Service Portal is one of Eazzy Banking’s digital solutions. This tool enables clients to proof of address.[99] open and check bank accounts; transact from their accounts via EazzyNet; send remittances to and from select countries; buy and sell stocks and shares; obtain insurance for themselves and their families in Kenya. There is an agent presence in eleven foreign countries, including seven Diaspora banking products include diaspora-specific current, Eazzy Save, junior, and business accounts. The US states, to facilitate the opening of diaspora accounts. There is no in- Diaspora Fixed Deposit Account facilitates lump sum investment and immediate borrowing, while the Diaspora person agent presence in the PRIME corridors (Uganda, South Africa Jijenge Account promotes disciplined savings habits through requiring small monthly contributions and banning and Germany). partial withdrawal of funds.[93]

Equity provides two Diaspora insurance covers related to deaths and funerals: (1) Diaspora Last Expense Cover provides cover for return transportation and funeral expenses for Kenyans living abroad and (2) Diaspora Return Ticket Insurance enables the diaspora to return home upon the death of next of kin.[93]

Migration and Financial Regulatory EazzyFinancial Banking Services App for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 56 Financial Services for Remittance Users

Priority Policy Actions

• Support for more remittance linked financial services including insurance, pensions, investments and savings especially those that target the last mile remittance beneficiaries. For Kenya to set an example globally of best practice and innovation in this area. These could include linkage to Government run providers such as National Hospital Insurance Fund (NHIF) and National Social Security Fund (NSSF). To achieve this, support a shift towards account-based remittance services as these cannot be offered as effectively with cash-to-cash remittances.

• It is recommended that interest paid to MNOs on their trust accounts is paid to low-income remittance (and other MoMo) users as interest on their balance (or paid into an M-Shwari-type locked savings account). This may encourage and drive formal savings.

• Provision of remittance specific financial literacy- financial Literacy especially for remittance receivers and outbound senders on channels, price comparators, checking fees and foreign exchange rate and remittance-linked financial services.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 57 Stakeholders and Coordination

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 58 The Structure of Remittance Governance in Kenya

• The Central Bank of Kenya Act (2014) gives the CBK the mandate to formulate and implement Other Relevant Supporting entities: monetary policy directed to achieving and maintaining stability in the general level of prices and to foster the liquidity, solvency and proper functioning of a stable market-based financial system • Ministry of Information, Communications and Technology (ICT) and (CBK, 2014).[100] Innovation – Mandate comprises formulation of policies and laws that regulate standards and services in the Information, Communication and • As part of its oversight role in financial stability through maintenance of a well-functioning Technology (ICT) sector, Telecommunications and the Media industry banking system. The CBK carries out the following Remittance related functions:[101] (MINICT, 2021)[102]

• Banking Supervision – Including Forex Bureaus and Money Remittance providers. In • Communications Authority (CA) – The regulatory authority for the Kenya, commercial Banks re permitted to provide remittances services under the Banking communications sector in Kenya and is responsible for facilitating the Act development of ICT sectors including broadcasting, cybersecurity, • National Payment System – Under the National Payment System Act (2011), oversight of multimedia, telecommunications, electronic commerce, postal and courier payment and settlement systems is a core central bank function through which the objectives services (CA, 2021).[103] CA provides market information and performance of safety and efficiency are promoted by monitoring existing and planned systems, assessing statistics of entities including Mobile Money providers. them against the objectives and, where necessary, inducing change. • Competition Authority of Kenya – Mandate is to enforce the Act with the • Financial Markets for Foreign Exchange Management – The CBK provides indicative objective of enhancing citizens welfare by promoting and protecting currency exchange rates which are determined by market forces. Remittance providers are at effective competition in markets and preventing misleading market liberty to use this or other currency indicators. conduct throughout the country (CAK, 2021).[104] • Statistics – This department publishes market information, for Remittances, these include monthly diaspora remittance inflows. • Financial Investigations Unit (FIU) is a special wing in the Directorate of Criminal Investigations that specializes in investigations on Financial • Banking Fraud investigations Unit – Investigates fraud complaints from commercial banks, crimes reported (FIU, 2021).[105] other financial institutions and parastatals and advises the financial industry on fraud prevention and detection strategies. • Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG) – Kenya is a member of ESAAMLG an 18-member group dedicated to combat money laundering by implementing FATF • The CBK also drives national financial inclusion initiatives including Financial Access, Literacy and Recommendations (FATF, 2021).[106] the ongoing development of the 4-year Financial Inclusion strategy.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 59 At present, interventions from development partners on remittances are limited in Kenya, apart from descriptive research studies. The CBK plays an active role in supporting the sector, and the Remittance Association advocates for the sector’s interests.

Regulators: • Central Bank of Kenya – Working towards improvement of remittance data both utilised internally and published; aim is to make it more comprehensive and indicative of corridor, channel and include outflows. Diaspora remittances survey planned by the CBK for Feb/Mar 2021 and remittances included in the Draft National Payment System. • Ministry of Foreign Affairs – Actualizing policy actions stipulated in the National Diaspora Policy

Apex Bodies: • Kenya Bankers Association – Providing Knowledge sharing on Kenya's remittance market • Kenya Forex and Money Remittance Association – Advocating for the interests of remittance service providers and liaising with the Central Bank for non-regulatory governance

Development Partners: • IFAD: o Financing Facility for Remittances (FFR) – Implemented PRIME Africa aimed at maximizing the impact of remittances for millions of families in Africa, contributing to foster local economic opportunities in the migrants' countries of origin and includes Kenya a focus country. o Global Forum on Remittances, Investment and Development (GFRID)- An event aimed at facilitating creation of partnerships and the exchange of best practices in maximizing the impact of remittances to the benefit of migrants' communities of origin. In June 2021, the GFRD event will be held in Nairobi, Kenya.

• FSD Africa in partnership with CENFRI have developed evidence-based, remittance-related knowledge pieces covering Kenya and other African countries.

• BFA Global – Conducted qualitative studies on refugee finance and policy and regulation pillars, in Kenya and Uganda leading to knowledge sharing and programme design.

• MSC (Microsave Consulting) – Consulting firm that has conducted behavioral studies on remittance beneficiaries and providers in Kenya and Uganda.

• IOM-has conducted studies on migrant remittances culminating in publications such the ‘Send Money and Invest in Kenya Guide’

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 60 Stakeholders and Coordination

Priority Policy Actions

• There is limited evidence of policy action and programs resulting from remittance focused studies conducted in Kenya (and other SSA countries), thus programmes aimed at implementing recommendations made on price reduction; promoting formal channels; and driving financial inclusion would be a suitable entry point.

• Leverage the National Remittances Stakeholder Network (NRSN) to create a Working Group for the coordination, implementation and review of improving Kenya's remittance landscape and implementation of the CBK's National Payment Strategy.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 61 Priority Policy Actions

Migration and Financial Regulatory Stakeholders and Market Structure Financial Services for Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 62 Priority Policy Actions

Migration and Remittances

I. Implement a data strategy that among other functions, enables improved data analytics and generation of market information including disaggregated remittance inflows, outflows, channel usage and estimates of informal flows. Planned amendments to reporting templates could be informed by CBK data needs as well as market needs with the following considerations: a) Harmonized templates and reporting across the EAC for consistency to ease eventual harmonization of regulations under the East African Monetary Union (EAMU). b) More detailed outflow to the same level of detail as inflow data (above) c) Information portals publicly available for easy access to disaggregated inflow and outflow remittance data to inform business decisions. d) Access to market share information of remittance service providers to enhance transparency in the market.

II. Industry collaboration on CBK's planned diaspora remittances survey launch in Feb/Mar 2021. Recommended collaborators could include: Institute of Africa Remittances, Financial Sector Deepening Kenya (FSD Kenya) and the Financing Facility for Remittances (FFR) at IFAD to maximise opportunities and ensure consistency across countries. This would present an opportunity for Kenya to share remittance best practice with other countries.

III. Inclusion of remittance modules in household surveys such as FinAccess planned in Kenya, especially to understand and form national estimates on the size of the informal market. Such data would also serve to guide policy decisions and action plans to formalize informal remittances and support efforts to curb illicit flows.

PRIME AFRICA 63 Priority Policy Actions

Financial Environment

I. Support transition to full payment ecosystem interoperability across channels: The current situation requires pre-funding of accounts for liquidity management. A national switch would enhance efficiency of settlement mechanisms. This, in turn, would enable operators to free up funds otherwise tied up in pre-funded accounts. A real time cross border interoperable platform integrating national and regional retail payment systems would then be more achievable from this vantage point and could ease the flow and settlement of cross border payments, ultimately reducing costs for both users and service providers. a) Agent interoperability would benefit agents by enabling consolidating different service provider floats into a single account, In future this could possibly be extended to bank agents under Pesalink model . b) Merchant interoperability – a universal Quick Response (QR) code would ensure interoperability but more importantly eliminate the need for Point of Sale devices as both merchants and customers can access it through app based smart phone or feature phones. This would be a significant move towards a fully open, efficient and affordable payments ecosystem driving down costs especially for the poor and informal businesses (FSD Kenya, 2018).[52]

II. Identify and leverage opportunities for cross border remittance payment and settlement through regional bloc retail payment systems. The Pan Africa Payment and Settlement system (PASPP) looks promising as it has a Digital Payment module whose usage can extend to remittances (Afreximbank, 2020).[53]

III. Open APIs for authentication and verification of e-KYC as currently KYC must be repeated for each service onboarding. This would also expand the number of providers who can safely access this register for e-KYC authentication (CBK, 2020b).[54]

IV. Advocate for service providers to sustainably make permanent some COVID measures such as reduced fees, expansion of transaction and balance limits

PRIME AFRICA 64 Priority Policy Actions

Regulatory Environment

I. Foster Transparency in the remittances market especially for mobile and digital services through improved disclosures of all pricing (fees and FX rates) provided live on company websites for non-customers to view. Create more awareness around credible price comparison sites targeting the Kenyan remittance market.

II. Expand remittance providers licensing categories to ensure even distribution of access points, improved access and choice. As an example, Forex Bureaus who are highly liquid mainly offer remittance services as sub agents but have capacity to become full agents. Product based licensing compared to service provider licensing would ensure products suitable for the market are licensed, this especially applies to Fintechs.

III. Consider publishing the CBK’s tracking system for licensing and new product/corridor approval service level agreements. A tracking system would ensure service providers can adequately plan their market entry.

IV. Review taxation on mobile money and digital services. An impact assessment can be conducted to determine correlations with informal channels.

V. Deployment of relevant Regtech and Suptech technologies would ease supervision in the expanding digital payments ecosystem, additionally, financial service providers would be able to efficiently and cost effectively manage compliance.

VI. Facilitate awareness and customer education on dispute resolution mechanisms, cybersecurity and fraud to enhance trust especially for digital products

I. Open API for authentication through IPRS and once Huduma Namba registry is accessible, authentication for providers with biometric functionality.

PRIME AFRICA 65 Priority Policy Actions

Remittance Market Structure

I. Review pricing and cost structures of cross-border remittance services, especially digital, and ensure they are efficient in alignment with the Draft National Payment Strategy 2021-2025. Given M-PESA's dominant position in the market and as the main pay-out partner of international remittances, enhance market competition, efficiency in cost structures and consumer protection to enhance choice.

II. It is recommended for cross-border remittances pricing to be transparent upfront and available online. It is recommended that there is full discloser on pricing, especially for mobile incl. displaying cash-out fees. Fees and FX margins should be publicly available on the MNOs website overtime, so that customers can understand the variations in costs and compare like-for-like across service providers. This should be mandatory within licencing agreements.

III. Streamlining mobile money remittance value chain – encourage operators to ensure they have the most appropriate solution for them. May not always be through an aggregator.

IV. Address the conversion of formal channels to informal usage in other markets and decide whether to / and what action to take. For example beyond disabling Agent till roaming facilities, what other actions can be taken to deter unauthorised M-PESA usage in Uganda? MTN Uganda deactivates roaming services after 1 month.

V. Review whether support is required through the Remittance Association to support cash only MTOs to digitise and assist with integration to mobile money. This is especially the case for Somali-owned MTOs that are cash-based.

PRIME AFRICA 66 Priority Policy Actions

Financial Services for Remittance Users

• Support for more remittance linked financial services including insurance, pensions, investments and savings especially those that target the last mile remittance beneficiaries. For Kenya to set an example globally of best practice and innovation in this area. These could include linkage to Government run providers such as National Hospital Insurance Fund (NHIF) and National Social Security Fund (NSSF). To achieve this, support a shift towards account-based remittance services as these cannot be offered as effectively with cash-to-cash remittances.

• It is recommended that interest paid to MNOs on their trust accounts is paid to low-income remittance (and other MoMo) users as interest on their balance (or paid into an M-Shwari-type locked savings account). This may encourage and drive formal savings.

• Provision of remittance specific financial literacy- financial Literacy especially for remittance receivers and outbound senders on channels, price comparators, checking fees and foreign exchange rate and remittance-linked financial services.

Stakeholder Coordination

• There is limited evidence of policy action and programs resulting from remittance focused studies conducted in Kenya (and other SSA countries), thus programmes aimed at implementing recommendations made on price reduction; promoting formal channels; and driving financial inclusion would be a suitable entry point.

• Leverage the National Remittances Stakeholder Network (NRSN) to create a Working Group for the coordination, implementation and review of improving Kenya's remittance landscape and implementation of the CBK's National Payment Strategy.

PRIME AFRICA 67 [email protected] [email protected]

PRIME AFRICA 68 Annex

PRIME AFRICA 69 Annex 1: Measures put in place by the CBK in response to COVID-19 and Impact

Agency & Participants Covid 19 Response Impact

CBK • Extension of repayment period for personal and household loans • Total loans restructured of KSh 844 billion accounted for 29 • Lowering of the Cash Reserve Ratio (CRR) from 5.25 percent to 4.25 percent percent of the total banking sector • Additional liquidity of KSh 35 billion to support the banks as they restructured performing loans CBK • Lowering of Central Bank Rate to enable banking sector to lower lending and • Average commercial banks’ lending rates decreased to 11.89 deposit rates. percent, a 16-year low enabling provision of affordable credit CBK, Commercial Banks, • Waiver of mobile money fees for transactions under Kshs 1000 (USD9), interbank • Between February and October 2020, the volume of Payment Service transfers and B2W and W2B bank. transactions up to Ksh. 1000 increased by 114% and the value Providers • Increased daily mobile money transaction limits from KSh 70,000 (USD 623) to of these transactions increased by 200%. Transactions under KSh 150,000 (USD 1,345). Ksh. 1000 account for over 80% of transactions • Daily limit for MoMo transactions – and MoMo wallet limit – increased from Ksh. • 2.8 million new 30-day active customers using MM (CBK 140,000 (USD 1,278) to Ksh. 300,000 (USD 2,738) National Payment Strategy, p.47) • Total monthly limit on MoMo transactions was removed • The monthly volume of PSP transfers increased by 87%and • PSPs and commercial banks directed to eliminate transfer charges between business-related transactions increased by 82% between MoMo wallets and bank accounts February and October 2020

Source: CBK Annual Report, 2020

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 70 Annex 2 - Kenya’s National Payment System

The National Payment system is broadly categorised into:

• Large Value Payments – Comprises the Kenya Electronic Payment and Settlement System (KEPSS) which is a Real National Payments System (NPS) Time Gross Settlement (RTGS) processing and settling domestic funds transfers in real time (t+1 after 2pm). KEPSS: Upgraded in June 2020, transaction capacity now at 1 million from 50,000 per day (CBK 2020).

Large Value payments Low Value payment • East African Payment System (EAPS) – A funds transfer mechanism used to transfer money from one bank to systems systems another across the border within the East African Community countries of Kenya, Rwanda, Tanzania and Uganda. Transactions are carried out in the EAC local currencies. o Performance: In 2019/2020, banks sent 3,020 transactions worth USD 496.1 million over the EAPS network. Retail The Kenya shilling was the leading trading currency with total values of USD 342.7 million (69.1 percent). Low Kenya Electronic Automated Payment uptake by other member states is attributed to (1) reluctance to trade in each other’s currencies (EA 2019) (2) Payment & Settlement Clearing Systems: system (KEPPS) House Cards, low volumes of intra-regional trade within EA and stiff competition from banks with established correspondent Mobile etc. bank relationships in the region (CENFRI 2018).

• Regional Payment and Settlement system (REPSS) – A multilateral netting system with end-day settlement in a Regional East Payment single currency allowing regional trade transactions using local currencies thus reducing dependency on African and dollars and euros. Only 9 member countries out of 21 participating in REPSS: Democratic Republic of Congo; Egypt; Payment Settlement Systems Kenya; Malawi; Mauritius; Rwanda; Eswatini; Uganda; and Zambia. Central Banks of Burundi, Djibouti, Sudan and System (EAPS) Zimbabwe are in advanced stages of preparations to join. Low participation is attributed to countries with multiple (REPSS) regional bloc memberships (COMESA, 2020) and low awareness amongst potential users. This system has the potential to benefit remittance payments and settlement if there are large volumes.

• The Pan African Switch System (PASS) will enable its regional subsidiaries in West Africa, East Africa, South and Central Africa and North Africa to create an ecosystem for switching and settlement of payment transactions across the continent.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 71 Annex 2 cont. - Interoperability and Switching in Kenya

• Bank Interoperability – The Kenya Interparticipant Transaction Switch (KITS) payments platform connects all Kenya Bankers Association (KBA) members in one domestic network under the commercial name PesaLink. This allows banks of all sizes and market share to benefit from an interoperable payments network . KITS allows any customer of a KBA member bank to send and receive funds in real-time from their accounts. In 2016, the KBA launched the Integrated Payments Service Limited (IPSL) which had the mandate to develop and launch Pesalink, an instant payments bank interoperability initiative. PesaLink has future plans to offer: G2P, P2G, bulk payments and mobile money interoperability.

• Card Interoperability – In Kenya, as with other international markets, Europay, Mastercard and VISA (EMV) enabled cards are interoperable and can be used at any member terminal locally and internationally. Smart cards (credit, debit or prepaid) are increasingly in use at any enabled ATM, POS terminals, kiosks, ecommerce merchants affiliated with institutions other than the institution which has issued the card (issuer and acquirer are different institutions).

• ATM Integration – Kenswitch is a shared financial switch by a consortium of more than 20 commercial banks in Kenya, it facilitates the delivery of electronic banking services 24/7 via various delivery channels. These include Service Activation, Account Enquires, Cash & Cheque Services, Bill Payments and Money Transfer Services. The venture is supported by the CBK and the KBA under the auspices of the National Payment Systems (NPS) Modernization and Reform Process Project but is wholly and privately owned by Loita Transaction Services. Predominantly for ATM sharing. Source: Draft National Payment Strategy 2021-2025, CBK • Payment Gateway – For example, Interswitch which is a privately owned Africa based payments processing company offering a variety of services with specialization on e-commerce payments.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 72 Annex 2 cont. - International and Local Aggregators for Remittances

International Aggregators • International aggregators play an important role in connecting RSPs to pay-out networks across multiple countries. • International aggregators serving the Kenyan market include MFS Africa, Thunes, TerraPay and Homesend. • Facilitate API integration across Remittance service providers-Mobile Money Providers, Payment card issuers, Banks, MTOs, thus extending reach, expanding payment options and value-added services. These models typically depend on RSPs prefunding accounts. • Safaricom has standard pricing agreements for aggregators and MTOs, that are dependent on volumes ranging from USD1.5 to USD0.5 per transaction • International aggregators typically take a fee per transaction ~$0.25 / 1.5% or less per transaction • International aggregators are testing interesting models of linking international remittances with other financial services and bill payment options. • Play an important role in intra-regional trade .. That drives volumes.

Local Aggregators • Niche aggregators are also emerging with headquarters in Kenya and offering remittance services, airtime top up and bill payments. These include EMQ Kenya who aim to be able to offer more competitive rates than regional and international players.

MNO MNO

MM Agents MM Wallet MM Wallet MM Agents Partner bank Partner bank

PRIME AFRICA 73 Annex 3: Timeline of AML/CFT Regulation and Kenya’s Risk-Based Approach to Consumer Due-Diligence

A Timeline of Development in AML/CFT Regulation

2009: Establishment of the Anti-Money Laundering framework to connect the respective legislation that the country had adopted.

2013: under NPS Act AML guidelines developed for Mobile payments services mainly outlining use of acceptable identification during Mobile account opening, setting daily and weekly transaction limits and carrying out KYC at the point of transactions and suspicious transaction tracking and reporting.

2015: CBK introduced reporting for exposure to AML and terrorism financing, risk mapping to inform CBK's risk-based approach to AML//CFT regulations and Internal risk assessment.

2017: Proceeds of Crime and Anti-Money Laundering Amendment Act, 2017. The new legislation and amendments are to enforce the AML and CTF framework and Source: CGAP, 2019 mechanisms.

2017: Prevention of Terrorism Act (POTA) together with the Prevention of Organized Crimes Act (POCA) tracking, identifying, and preventing or punishing organized criminal or terroristic actions, as well as retrieve the criminal proceeds and direct them to proper use and cause.

March 2018: CBK issued a Guidance note on conducting Money Laundering/Terrorism Finance (ML/TF) Risk Assessments and submission of annual reports.

PRIME AFRICA 74 Annex 4: Further analysis on pricing to send money to Kenya

• Sending remittances to Kenya through banks attracts the highest fees, except for Rwanda where banks costs are lower than MTOs. • Overall MTOs are cheaper than banks, despite MTOs paying commissions to agents at both send and receive side which are costs that are not incurred using the other send channels. This shows that there is intense competition between MTOs in sending money using cash to compete for customers and against the informal operators. • It is evident that there are significant variations in cost even within the same corridor and using the same channels, especially in the charges offered by banks.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

PRIME AFRICA 75 According to the CBK, UK, USA, Tanzania, Canada and Uganda are the top send countries while India, Uganda, Tanzania, Nigeria and Egypt are the top outbound destinations. Germany and Sweden are the largest send markets from the EU, although volumes are small (less than USD100million in 2018).

Remittance Inflows to Kenya (USD millions) Remittance Outflows from Kenya (USD millions) 2015-2018 2015-2018 (World Bank, Bilateral Remittance Matrix)[9] (World Bank, Bilateral Remittance Matrix)[9]

UK USA Tanzania Canada Uganda India Uganda Tanzania Nigeria Egypt 855 423 734 663 585 584 523 516 466 191 184 86 84 167 83 78 77 143 126 123 58 57 112 109 107 100 95 84 42 39 37 35 18 15 15 14 14 13 13 12

2015 2016 2017 2018 2015 2016 2017 2018 • The UK, USA, Tanzania, Canada and Uganda were the top five sending • India, Uganda, Tanzania, Nigeria and Egypt were the top five receiving countries from 2015-2018. countries from 2015-2018.

Nb. This data is from the World Bank Bilateral Matrix and does not include data The World Bank data indicates a significant spike in international remittances from from the Middle East. Data varies from data published by the Central Bank of Kenya to Uganda in 2018, it is not yet clear what is behind this increase especially Kenya. However, the CBK does not currently publish inbound or outbound data by without corresponding corridor data from other sources including CBK and Bank of corridor. Uganda.

Migration and Financial Regulatory Financial Services for Stakeholders and Market Structure Recommendations Remittances Environment Environment Remittance Users Coordination

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PRIME AFRICA 77 Bibliography p11 p13 continued [1] CBK (2017-2020). “Diaspora Remittances”: https://www.centralbank.go.ke/diaspora-remittances/ [14] CBK (2020b). “Kenya National Payments System Vision and Strategy” (p. 47): [2] World Bank (2019a). “Inflows: Annual Remittances Data (updated as of October 2020)”: https://www.centralbank.go.ke/wp-content/uploads/2020/12/CBK-NPS-Vision-and-Strategy.pdf https://www.worldbank.org/en/topic/labormarkets/brief/migration-and-remittances [15] The Star (2020, December 22). “Safaricom announces new M-Pesa tariff reductions”: [3] World Bank (2019b). “Inflows: Annual Remittances Data (updated as of Apr. 2019)”: https://www.the-star.co.ke/news/2020-12-22-safaricom-announces-new-m-pesa-tariff-reductions/ https://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/migration-remittances-data [4] The East African (2019) “Diaspora remittances outpace FDI, but costs remain a major hurdle”: p14 https://www.theeastafrican.co.ke/tea/business/diaspora-remittances-outpace-fdi-but-costs-remain-a- [16] ILO (2020). “An assessment of labour migration and mobility governance in the IGAD region: major-hurdle-1415926 Country report for Kenya”: https://www.ilo.org/wcmsp5/groups/public/---africa/---ro-abidjan/---sro- [5] Kenyan Digest (2020). “Kenya records more remittances from its citizens working abroad”: addis_ababa/documents/publication/wcms_743315.pdf https://kenyandigest.com/kenya-records-more-remittances-from-its-citizens-working-abroad/ [17] UNDESA (2019b). ”International migrant stock by destination and [6] World Bank (2015-2018). “Bilateral Remittance Matrices”: origin”: https://www.un.org/en/development/desa/population/migration/data/estimates2/estimates19.asp https://www.worldbank.org/en/topic/labormarkets/brief/migration-and-remittances [18] UNHCR (2020a). “Kenya Statistics Package: Statistical Summary”: https://www.unhcr.org/ke/wp- [7] CBK (2021). “Monetary Policy Committee Meeting Background Information – Dr. Patrick Njoroge” (not content/uploads/sites/2/2020/08/Kenya-Statistics-Package-31-July-2020.pdf yet published officially by CBK) [19] RMMS (2018). “RMMS Mixed Migration Monthly Summary: East Africa and Yemen”: [8] FinAccess (2019). “2019 FinAccess HouseHold survey”: https://www.centralbank.go.ke/wp- https://reliefweb.int/sites/reliefweb.int/files/resources/RMMS%20Mixed%20Migration%20Monthly%20Su content/uploads/2019/04/2019-FinAcces-Report.pdf mmary%20March%202018.pdf [20] UNHCR (2020b). “Figures at a Glance”: https://www.unhcr.org/ke/figures-at-a-glance p12 [21] IOM (2018). “Migration in Kenya: A Country Profile 2018” (p. 48): [9a] FinAccess (2019). “2019 FinAccess HouseHold survey”: https://www.centralbank.go.ke/wp- https://publications.iom.int/system/files/pdf/mp_kenya_2018.pdf content/uploads/2019/04/2019-FinAcces-Report.pdf [22] Maastricht Graduate School of Governance (MGSOG) (2017). ”Kenya migration profile: Study on [9b] CBK (2021). “Monetary Policy Committee Meeting Background Information – Dr. Patrick Njoroge” migration routes in the East and Horn of Africa” (p. 6): (not yet published officially by CBK) https://i.unu.edu/media/migration.unu.edu/publication/4715/Kenya-Migration-Profile.pdf [23] UNHCR (2019). ”UNHCR ready to assist refugee group about to be relocated to Kakuma camp”: p13 https://www.unhcr.org/ke/15562-unhcr-ready-to-assist-refugee-group-about-to-be-relocated-to-kakuma- [10] CBK (2021). “Weekly Bulletin Source: 15-01-2021": camp.html https://www.centralbank.go.ke/uploads/weekly_bulletin/1169157793_Weekly%20Bulletin%20Report%20 January,%2015%202021.pdf [11] CBK (2020a). “Diaspora Remittances”: https://www.centralbank.go.ke/diaspora-remittances/ [12] World Bank (2020a). “World Bank Predicts Sharpest Decline of Remittances in Recent History”: https://www.worldbank.org/en/news/press-release/2020/04/22/world-bank-predicts-sharpest-decline-of- remittances-in-recent-history [13] World Bank (2020b). “COVID-19: Remittance Flows to Shrink 14% by 2021”: https://www.worldbank.org/en/news/press-release/2020/10/29/covid-19-remittance-flows-to-shrink-14-by- 2021

PRIME AFRICA 78 Bibliography p15 p17 continued [24a] UNDESA (2019a). “Population Facts”: [33] CBK (2020c). “Annual Report and Financial Statements 2019/2020”: https://www.un.org/en/development/desa/population/migration/publications/populationfacts/docs/Migratio https://www.centralbank.go.ke/uploads/cbk_annual_reports/1738438903_Annual%20Report%20Novem nStock2019_PopFacts_2019-04.pdf ber%2017%20for%20upload%20(without%20bleeds).pdf [24b] UNDESA (2019b). ”International migrant stock by destination and origin”: [34] COMESA (2020). “Member States”: https://www.comesa.int/members/ https://www.un.org/en/development/desa/population/migration/data/estimates2/estimates19.asp [25a] Global Alliance Against Traffic in Women (GAATW) (2018). “Women’s Labour Migration on the p18 Africa-Middle East Corridor: Experiences of Migrant Domestic Workers from Kenya”: [35] Open Society Justice Initiative (2019). “Kenya’s National Integrated Identity Management System”: https://www.gaatw.org/publications/Kenya_Country_Report.pdf https://www.justiceinitiative.org/uploads/8f3b665c-93b9-4118-ad68-25ef390170c3/briefing-kenya-nims- [25b] Keenan, J., and Rugene, N. (2019, October 22). “'They see us as slaves': Kenyan women head for 20190923.pdf the Gulf despite abuse fears”: https://www.theguardian.com/global-development/2019/oct/29/kenyan- [36] Citizen Digital (2020). “OPINION: Huduma Namba to exclude millions of Kenyans, violates court women-gulf-despite-abuse-fears-domestic-workers orders”: OPINION: Huduma Namba to exclude millions of Kenyans, violates court orders - Citizentv.co.ke p16 [37] East African Community (2017). “EAC to start issuing EA e-Passport January 2018”: [26] FSD Africa (2018). “Moving money and mindsets: increasing digital remittances https://www.eac.int/press-releases/148-immigration-and-labour/754-eac-to-start-issuing-ea-e-passport- across Africa”: https://www.fsdafrica.org/wp-content/uploads/2019/08/DMA-Moving-Money-and- january-2018 Mindsets-28.11.18-1-2_compressed.pdf [27] Photo credit: SMart World p19 Communications: https://www.facebook.com/SmartWorldCommunications/photos/a.533337813431257/3[38] CBK (2020d). “Banking supervision”: https://www.centralbank.go.ke/bank-supervision/ 373749432723400/?type=3&theater [39] AMFIK (2017). “AMFI Members”: https://amfikenya.com/membership-categories/ [40] CA (2020). “Sector Statistics Report Q3 2019-2020”: https://ca.go.ke/wp- p17 content/uploads/2020/07/Sector-Statistics-Report-Q3-2019-2020-.pdf [28] CBK (2020a). “Diaspora Remittances”: https://www.centralbank.go.ke/diaspora-remittances/ [41] Equitel (2020). https://equitel.com [29] Afreximbank (2020). “The Governing Council of the Pan-African Payment and Settlement System [42] ORCA (2015). “Inclusive Growth: Improving Microfinance Regulation to Support Growth and Holds Inaugural Meeting”: https://www.afreximbank.com/the-governing-council-of-the-pan-african- Innovation in Micro-enterprise: The Republic of Kenya Background Country Report ”: payment-and-settlement-system-holds-inaugural-meeting/ https://orca.cf.ac.uk/70452/1/Kenya%20Background%20Country%20Report%20FINAL.pdf [30] Tieto (2017). “Tieto develops the payment infrastructure design and software of PesaLink – Kenya’s first instant payment platform”: https://campaigns.tieto.com/sites/default/files/2017- p23 06/TIETO_KBA_PESALINK_CUSTOMER%20CASE_ENG_A4.pdf [43] SARSA [31] The East African (2019). “EAC to upgrade underperforming e-payment system”: (2020). https://www.sasra.go.ke/index.php?option=com_phocadownload&view=category&id=15&Itemid= https://www.theeastafrican.co.ke/tea/business/eac-to-upgrade-underperforming-e-payment-system- 118#.YA8PrDnivWV 1424186 [44] Nzekwe, H. (May 2020). ”Kenya’s Glowing Fintech Scene Is Dulled by A [32] Cenfri (2018). “Payment systems in sub-Saharan Africa. Note 1: Themes and imperatives for Lukewarm Wealthtech Segment”: https://weetracker.com/2020/05/14/kenyan-fintech-wealthtech-scene/ national and regional payment systems that enable remittances”: https://cenfri.org/wp- [45] Tanda (2021). https://www.tanda.africa content/uploads/2018/12/Payment-systems-in-SSA-Note-1.pdf

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