njuguna ndung ’ u : money transfer services address by prof njuguna ndung ’ u, governor of the central bank of kenya, at the official launch of m - pesa international money transfer service, nairobi, 13 october 2009. * * * members of the board of safaricom limited, chief executive officer of safaricom limited – mr. michael joseph, distinguished guests, ladies and gentlemen : it is indeed my pleasure to be with you this afternoon on this auspicious occasion of the launch of safaricom ’ s mobile based international money transfer service. this service builds up on the very successful and world renowned domestic money transfer service – m - pesa – an extremely important tool for financial inclusion. this service has earned our nation much praise and continues to attract the attention of payments system experts the world over. i congratulate the board, management and staff of safaricom limited for the evident commitment they have shown to the needs of the kenyan market. m - pesa and other similar services offered by other service providers are a revolutionary concept not only in the market place of ideas, but also in the practicalities of technological platforms provided by advancement of technology. it started four years ago, at a time when the market was yearning for practical ideas to facilitate access to financial services to a large section of the un - banked population. four years down the line, virtually everyone on the safaricom platform has an m - pesa account. the service is used to transfer ksh 1. 35 billion per day, a tremendous success by any measure. the launch of the international leg of the m - pesa money transfer service is therefore a natural progression in the value chain. ladies and gentlemen, mobile phone based financial services offer a convenience that is not available in any other consumer channel. in developing countries like kenya, the mobile handset provides the unbanked segment of the population the potential to access all types of financial services ; transactional and informational. in addition, it is the preferred channel because it has so far ensured security, convenience and is cost effective, while the business is conducted in a non threatening environment. the growing number of the un - banked population needs a convenient, safe and affordable means in which to access financial services. at the same time, the growth of micro banking, insurance services, and mutual funds require low cost delivery channels to effectively serve their markets. the “ mobile phone opportunity ” is the answer. the mobile experience also offers remarkable opportunities

informal remittances channels to migrate to the use of this reliable, albeit convenient platform to send money home. ladies and gentlemen, in view of the important role of the remittances in our economy, an overriding policy objective for the central bank is to lower costs through competition facilitated by the entry of international money transfer services providers. this will enhance service delivery and enable users of such services obtain competitive remittances rates at substantially reduced unit costs. in this regard, central bank has issued and continues to issue permits to all applicants seeking to enter the international money transfer services market under the legal framework spelt out in the cbk act section 33 a, subject to meeting the set conditions. the safaricom mobile based international money transfer service has been granted with a permit pursuant to this policy objective. at this juncture, i would like to reiterate that while the central bank welcomes innovative products, it evaluates all such products to ensure safety and efficiency concerns are adequately addressed. the central bank has the necessary capacity to properly evaluate and appraise technology driven financial services to ensure they meet international standards. services that involve partnerships with commercial banks have to adhere to the existing prudential and statutory banking sector requirements. we will work closely with commercial banks and other service providers to increase awareness and enlarge the frontier of services. the central bank is also cognizant of the fact that international remittances platforms could be used as money laundering channels. part of our evaluation therefore involves subjecting applicants to a through scrutiny of their aml compliances programmes not only in kenya, but also in the sending jurisdictions. in this regard record keeping and “ kyc ” requirements must be adhered to as part of the approval conditionality. ladies and gentlemen, the subject of migrant worker remittances and their socio economic significance both for the sending and receiving countries has become a popular topic for governments, payment systems experts and other public policy makers. international remittances bring with them substantial welfare gains to the receiving countries and have huge developmental potential. the world bank estimates that recorded remittances by some 200 million migrants from developing countries reached us $ 283 billion in 2008, up from us $ 265 billion in 2007, while unrecorded flows through informal channels could even be higher. as a share of gdp, remittances constitute about 2 % of gdp. these numbers are almost equivalent to the foreign direct investment ( fdi ) flows, and may