CENTRAL BANK OF KENYA
Remarks by
PROF. NJUGUNA NDUNG’U
GOVERNOR
AT THE
LAUNCH OF THE DRAFT ELECTRONIC RETAIL TRANSFERS AND
DRAFT ELECTRONIC MONEY ISSUERS REGULATIONS
KKeennyyaa SScchhooooll ooff MMoonneettaarryy SSttuuddiieess,, NNaaiirroobbii
Thursday, February 03, 2011

The Communications Secretary, Ministry of Information and
Communication;
The Chief Executive Officers of Mobile Phone Companies;
Officials from the Communications Commission of Kenya;
Officials from the Financial and Legal Sector Technical Assistance Project;
The Consultants, Bankable Frontiers Associates;
Heads of Department, Central Bank of Kenya;
Distinguished Guests;
Ladies and Gentlemen:
It gives me great pleasure to join you all at this important moment in the
calendar of our financial sector to mark yet another milestone in our National
Payments System reform and modernization process. Central Bank of Kenya
continues to receive requests to authorise innovative electronic payment
services. These requests which benefit the public, and for that reason, the
economy requires Central Bank to ensure adequate risk mitigation. In this
regard, the formulation and implementation of regulatory and oversight
policies that govern this fast expanding sphere of mobile phone and mobile
banking services is therefore highly desirable.
Further, and as you may be aware, in the area of retail payments, Central Bank
of Kenya has deliberately taken a “test and learn” approach, as is referred
today by the G20 in the Principles for Innovative Financial Inclusion issued
in 2010. While this is true, we have engaged widely and monitored closely the
progress of payment service providers with a view to enhancing good practices
in the Kenyan market and to understand trends in the regulation of payment
providers internationally as a way of benchmarking our efforts.
Ladies and Gentlemen: Effective regulation requires prudential guidelines
in policy and oversight activities of relevant payment system operators and
regulators. In this regard, I am glad to inform you that the Bank has drafted
regulations for the retail payments sub-sector of our National Payments
System. These regulations, which are the subject of this workshop, will go a
long way in ensuring that E-Money Issuers and Payment Service Providers

conduct their businesses prudently and in accordance with the provisions of
the Central Bank of Kenya Act.
The development of these regulations has required extensive consultations
including the workshop which some of you attended on September 1, 2010 at
the Serena Hotel. As a result of these consultations, the Bank came up with
two sets of regulations; electronic retail transfers and e-money issuers
regulations. The purpose of these two sets of regulations will be;
a). To define retail transfers and provide for the delivery of retail transfers
by banks and financial institutions as well as persons who are not
licensed as banks or financial institutions;
b). To facilitate the provision of electronic payment services without
compromising the safety and efficiency of the National Payment System;
c). To provide minimum standards for consumer protection and risk
management to be adhered to by all providers of retail transfers;
d). To provide for the authorization of e-money issuers and the conduct of
the business of e-money issuing;
e). To provide for the appointment of agents by e-money issuers and the
registration of such agents as well as rules of engagement; and,
f). To provide for the appropriate measures to protect the interest of the
clients of e-money issuers.
Ladies and Gentlemen: The mobile phone money transfer technology has
in a few years of its existence demonstrated how financial services can be
provided to a large number with least cost using appropriate technological
platforms. This is how our financial inclusion efforts have borne some fruits.
In only four years of the existence of mobile phone money transfer services,
four mobile phone operators have launched the services and have enrolled
over 15.4 million customers and recruited 39,449 agents. Total transactions
have now reached Ksh.2.45 billion a day and Ksh.76 billion a month using
December figures. This has created many opportunities for Kenyans including
employment, access to financial services, and an effective tool for channelling
currency to the banking system.

But when a sector is booming, rules are forgotten or misinterpreted. We have
to safeguard the rules and the business.
Ladies and Gentlemen: The phenomenal success of mobile phone money
transfers has put Kenya at the centre stage globally in matters of financial
inclusion and innovation. But sustaining success has its challenges. We have
to be ready to modify our businesses to cope and rules to contain the main
actors and new entrants to the business.
In this regard, I would like on behalf of the Central Bank of Kenya, to thank
the Government through the Financial and Legal Sector Technical Assistance
Project (FLSTAP) and all other stakeholders for the support they have
accorded the Bank in the Payment Systems reform and modernization
process. In particular, I wish to commend the Government for supporting the
Bank in drafting regulations which we are about to launch today. I wish
further, to assure the industry that Central Bank will continue to play its role
in promoting a stable and conducive environment for financial innovation to
thrive.
Importantly, I wish at this point to inform you that the Central Bank has,
together with the Government, developed the National Payments System Bill
which when enacted will enhance further the regulation and supervision of
payment systems and payment service providers. These regulations are
therefore meant for use by the industry and to streamline activities while the
National Payments System Bill will come in to reinforce them. This will enable
Kenya’s payment system to comply with the Bank for International
Settlements (BIS) Core Principles and Central Bank responsibilities while at
the same time giving CBK specific and enhanced powers over payment
systems in Kenya.
Finally, I would like to most sincerely thank all the stakeholders and especially
Bankable Frontiers Associates for successfully working with the Bank to draft
these important policy documents which we believe will guide our activities in

coming years. With these remarks, I wish to officially launch the draft
electronic retail transfers and draft electronic money issuers regulations.
THANK YOU