Kenya’s leading mobile operator Safaricom is investigating an illegal use of its money transfer service M-Pesa in Uganda.
Mr Michael Joseph, the Safaricom chief executive officer said the company does not offer the money transfer services in Uganda.
A Safaricom card being scratched. M-Pesa services in Uganda are under scrutiny.
The service has been running smoothly for the past year in the country without the knowledge of Safaricom, until a glitch in the system last week forced agents and users to enquire about the interruption.
Safaricom does not operate the M-pesa network in neighbouring countries; however it has entered into arrangement with telecommunication operators in Tanzania and Uganda to offer its Voice and Short Messages Services SMS in those countries.
It has entered into partnership with MTN in Uganda and Vodacom in Tanzania.
Officials from the Uganda Communication Commission and Bank of Uganda denied any knowledge of the M-pesa operations in Uganda.
UCC’s Corporate Affairs Manager Mr Fred Otunnu told Business Power that he was unaware of the existence of M-pesa agents or services in Uganda.
The agents have been cashing in on the number of Kenyan students in Uganda and business people who conduct cross-border businesses.
Students and business people have been paying heavily for the services. For example, the agents charge 4 per cent for every transaction on top of the normal Safaricom deductions. This means that to withdraw KShs10,000 (UShs240,000) one parts with kShs400 (UShs9,600).
However, M-pesa customers feel that even with these charges the service is still cheap compared to others like Western Union which charges 10 per cent for the same amount.
“I was very happy when M-pesa started operating in Uganda; besides being cheap it’s quick and convenient unlike buses which take days to deliver the parcel,” Ms Stella Kamau, a Kenyan communications student at Kampala International University, said.
She said she is now stranded due to the glitch as her money was trapped in her simcard.
“I don’t know what to do. I cannot pay rent and my pocket money has run out my only hope is for the service to resume soon,” she said.
However because of the technical glitch, M-pesa agents have started making weekly trips to the border towns of Busia and Malaba to transact business there.
Students who have money in their simcards give them to the agents including all the details like Personal Identification Number (PIN).
Afterwards the agents make the withdrawals on their behalf at an agreed payment rate.
The operation is said to be operated by Kenyan students at the universities and other Kenyans in Kampala with collaboration with registered M-pesa agents in Kenya.
A number of them who interviewed by Business Power requested anonymity saying that it would jeopardize their operations with Safaricom in Kenya. They said that the mobile provider was aware of the whole transactions but they were under instruction not to comment about it to journalists.
The M-pesa agents blamed MTN for the glitch saying that MTN had switched then off intentionally because it is expecting to launch a similar mobile money transfer service next week.
However MTN’s Marketing Manager Mr Isaac Nsereko refuted the claim saying that MTN does not have an agreement with Safaricom as far as M-pesa is concerned.
“We only have an agreement to offer voice calls and short messaging services (SMS) to Safaricom customers in Uganda,” Mr Nsereko said.
The interruption of the service comes at a time when MTN, whom Safaricom has signed a roaming service deal with, is piloting its money transfer project to be launched next week.
The investigation by Safaricom comes just weeks after the Central Bank of Kenya gave it a clean bill of health after conducting a forensic audit into its operations.
Concerns have been about the safety of subscribers’ money and the ability of the government to counter money laundering through the mobile money transfer.
Security risks, according to experts, are high if money is to be transacted over two networks.
Mr Raghavan Kunigahalli, chief technology officer with SBA technologies, a company offering intelligent Software solutions in Kenya says that other than one network provider being unable to trace the movement beyond its network it is also not possible to know the identity of users.
“Handsets were not designed for financial transactions and lack essential security features,” Mr Kunigahalli said.
He added that chances of the system being hacked into while using two operators and the PIN number being fraudulently obtained are higher than when using one operator.