IMF Recommends Shielding Of MPESA Ahead Of CBK Digital Shilling Plan

The International Monetary Fund (IMF) has given a recommendation to safeguard mobile money transfer platform M-PESA and banks from unfair competition by the planned digital shilling by the Central Bank of Kenya (CBK).

The proposed Central Bank Digital Currency (CBDC) has been seen as a competitor to mobile money, especially in its ability to lower transaction costs.

In a commentary released as a response to CBK regarding the CBDC issue, IMF stated, “The paper could state the intent of potential issuance of CBDC is to complement rather than substitute existing private-sector digital payment solutions, and affirm CBK’s commitment to an open, competitive payment system.”

CBDC may also pose a relative threat to banks because of its ability to enable customers to bypass lenders. In this plan, the CBK will take on a new role of keeping track of holdings, transactions, and settlements.

With the aforementioned competition concerns, the IMF has voiced its concern, urging caution as the CBK progressed with preparation for the possible adoption of a digital currency.

IMF went ahead to say, “Given Kenya’s financial sector’s remarkable progress in developing digital solutions, it is important that the paper emphasises CBDC will “do no harm” and does not stifle such welcome digitalisation developments by taking away customers of banks and other digital finance providers, increasing the cost of financing for banks, or depriving banks of valuable information they obtain through establishing customer relations.”

The proposal is currently under public discussion.