Kenya’s Central Bank Targets Dramatic Mobile Money Fee Reduction to Boost Financial Inclusion

In a bold regulatory move that could fundamentally reshape Kenya’s digital financial landscape, the Central Bank of Kenya (CBK) has proposed cutting mobile money transaction fees by approximately half, targeting a reduction in average person-to-person transfer costs from KSh 23 to just KSh 10. The proposal, embedded within the Kenya National Financial Inclusion Strategy 2025-2028, represents one of the most significant interventions in the mobile money sector since the revolutionary launch of M-Pesa nearly two decades ago.

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The policy initiative directly affects Kenya’s dominant mobile money providers—Safaricom’s M-Pesa and Airtel Kenya’s Airtel Money—services that have become deeply woven into the economic fabric of the nation. With over 82.4 million registered mobile money accounts serving a population of approximately 55 million people, mobile money penetration in Kenya exceeds 100 percent when accounting for individuals holding multiple accounts, reflecting the technology’s extraordinary integration into daily financial life.

The proposed fee reduction aims to address what the CBK identifies as a critical barrier to deeper financial inclusion: transaction costs that remain prohibitively expensive for many Kenyans, particularly those in rural areas and lower-income segments who could benefit most from expanded access to digital financial services. By lowering the cost threshold for mobile money usage, regulators hope to stimulate increased transaction volumes, encourage uptake of more sophisticated financial products, and ultimately advance Kenya’s ambitious financial inclusion objectives.

The Financial Inclusion Imperative: Kenya’s Vision for 2028

The fee reduction proposal forms a central component of the Kenya National Financial Inclusion Strategy 2025-2028, a comprehensive policy framework designed to expand access to affordable, appropriate financial services across all segments of Kenyan society. The strategy reflects recognition that despite Kenya’s global leadership in mobile money innovation and adoption, significant inclusion gaps persist, particularly affecting rural populations, women, youth, and economically marginalized communities.

Financial inclusion—broadly defined as access to useful and affordable financial products and services that meet individuals’ needs for transactions, payments, savings, credit, and insurance—has emerged as a critical development priority globally. Extensive research demonstrates strong correlations between financial inclusion and poverty reduction, economic growth, gender equality, and resilience to economic shocks. For developing countries like Kenya, expanding financial inclusion represents both a social equity imperative and an economic development strategy.

Kenya has achieved remarkable progress on financial inclusion metrics over the past two decades, driven primarily by the explosive growth of mobile money services. The 2021 FinAccess household survey, the most comprehensive assessment of financial inclusion in Kenya, found that 83.7 percent of Kenyan adults had access to some form of formal financial service—a dramatic increase from just 26.7 percent in 2006. Mobile money accounts represented the primary driver of this transformation, with penetration reaching levels unmatched in most developing countries.

However, the CBK’s analysis reveals that despite high headline access figures, actual usage of digital financial services remains concentrated in basic person-to-person transfers, with limited uptake of more sophisticated offerings like digital credit, insurance products, or formal savings mechanisms. This usage gap suggests that many Kenyans possess mobile money accounts but utilize them only for simple money transfers rather than as comprehensive financial management tools. Addressing this gap requires both reducing transaction costs and developing products better aligned with the needs and circumstances of underserved populations.

The 2025-2028 strategy establishes specific, measurable targets for financial inclusion advancement, including increasing the proportion of adults using formal financial services for savings and credit, expanding insurance penetration beyond current low levels, reducing gender gaps in financial access and usage, and enhancing financial literacy and consumer protection frameworks. The mobile money fee reduction represents a key enabler for achieving these broader strategic objectives.

Understanding the Current Mobile Money Ecosystem

To appreciate the significance of the proposed fee changes, one must understand the scale and structure of Kenya’s mobile money ecosystem. As of December 2024, the sector encompassed 82.4 million registered mobile money accounts—a figure that has grown consistently over the years as providers expanded their customer bases and individuals opened multiple accounts across different networks.

Supporting this vast account base, the ecosystem includes over 381,000 active agents—the retail outlets, shops, and individuals who facilitate mobile money services by helping customers deposit cash into their mobile accounts (cash-in transactions) and withdraw electronic money as physical cash (cash-out transactions). These agents operate across every corner of Kenya, from busy urban centers to remote rural villages, creating a financial services distribution network far more extensive than traditional bank branches could ever achieve economically.

The transaction volumes flowing through this ecosystem prove truly staggering. In December 2024 alone, the system processed more than KSh 309 billion in cash-in transactions and KSh 753 billion in cash-out transactions—representing well over KSh 1 trillion in combined monthly transaction value. These figures dwarf the transaction volumes of Kenya’s traditional banking sector and underscore mobile money’s central role in the national economy.

Beyond mobile money, Kenya’s digital financial infrastructure includes 2,289 automated teller machines (ATMs), 48,653 point-of-sale (POS) machines enabling card-based payments at merchant locations, and 12.9 million active cardholders across prepaid cards, debit cards, and credit cards. While these traditional digital payment mechanisms serve important functions, particularly for formal sector workers and urban populations, mobile money’s agent network and user-friendly interfaces have proven far more accessible to mass market and rural customers.

Safaricom’s M-Pesa dominates Kenya’s mobile money landscape with approximately 30 million active customers and market share exceeding 90 percent. Launched in 2007 as a simple person-to-person money transfer service, M-Pesa has evolved into a comprehensive financial platform offering bill payments, merchant payments, savings products, credit facilities, international remittances, and integration with bank accounts. M-Pesa’s success has made Safaricom one of East Africa’s most valuable companies and generated substantial profits that fund network infrastructure investments and shareholder returns.

Airtel Kenya’s Airtel Money service represents the primary competitor, serving several million customers though with significantly smaller market share than M-Pesa. Smaller players including Telkom Kenya’s T-Kash have struggled to gain meaningful traction against M-Pesa’s dominant position. This market concentration creates a near-monopoly situation where Safaricom’s pricing decisions face limited competitive pressure, potentially contributing to the relatively high transaction fees that concern regulators.

The Transaction Fee Structure: Current Costs and Proposed Changes

Mobile money providers charge fees for various services, but person-to-person transfers—where one individual sends money to another individual’s mobile money account—represent the most common transaction type and the primary focus of the CBK’s proposed intervention. Current fee structures vary based on transaction amounts, with larger transfers incurring higher absolute fees though typically lower percentage costs.

The CBK’s analysis indicates that average fees for person-to-person transfers currently stand at approximately KSh 23 per transaction across different transaction sizes and providers. The proposed reduction would lower this average to KSh 10—a cut of more than 56 percent that would significantly reduce the cost burden on users, particularly those making frequent smaller-value transfers.

To understand the impact, consider a low-income Kenyan earning KSh 15,000 monthly who receives weekly remittances of KSh 2,000 from a family member working in Nairobi. Under current fee structures, each transfer might cost KSh 28, totaling KSh 112 monthly in transaction fees representing 0.75 percent of income. Under the proposed fee structure potentially charging around KSh 10-12 per transfer, monthly fees might drop to KSh 40-48, saving this individual KSh 64-72 monthly—money that could purchase several kilograms of maize meal, pay for a child’s school meal program, or contribute to household savings.

Multiplied across millions of Kenyans making regular mobile money transfers, these savings aggregate to billions of shillings annually remaining in household budgets rather than flowing to mobile money operators as fee revenue. For the providers, particularly Safaricom which derives substantial revenue and profit from M-Pesa services, the proposed fee reduction represents a significant threat to financial performance and shareholder value.

Safaricom’s most recent annual financial results revealed that M-Pesa contributed approximately KSh 139 billion in revenue during the 2024 financial year—representing roughly one-third of total company revenue. M-Pesa’s high profit margins, stemming from the mature platform’s limited marginal costs for processing additional transactions, make the service extraordinarily profitable. Any mandated fee reduction directly impacts this profit stream, potentially requiring cost adjustments, service modifications, or acceptance of reduced profitability.

The January 2025 fee adjustments implemented by Safaricom, which the CBK references in its policy document, actually increased certain charges rather than reducing them. Withdrawal fees for amounts between KSh 101 and KSh 2,500 rose from KSh 28 to KSh 29, while withdrawals between KSh 50,001 and KSh 500,000 now cost KSh 309. These increases, though modest in absolute terms, moved in the opposite direction from the CBK’s desired policy trajectory, potentially contributing to regulatory determination to mandate more substantial fee reductions.

The COVID-19 Precedent: Lessons from Fee Waivers

The CBK’s policy document specifically references the experience during the COVID-19 pandemic when, under regulatory guidance, mobile money providers temporarily waived fees for transactions below KSh 1,000 and implemented other customer-friendly changes designed to facilitate cashless transactions during lockdowns and movement restrictions. This natural experiment provided valuable insights into how fee reductions affect user behavior and transaction volumes.

The results proved dramatic. The CBK notes that these measures led to a 97 percent increase in the value of M-Pesa transactions between October and December 2020 compared to the pre-waiver baseline. This near-doubling of transaction values within a single quarter demonstrated the substantial suppressed demand for mobile money services that high fees had been constraining. When costs fell to zero for smaller transactions, users dramatically increased their usage, suggesting significant price elasticity in demand for mobile money services.

The pandemic experience provided evidence supporting arguments that fee reductions, while reducing per-transaction revenue for providers, might generate compensating increases in transaction volumes that partially or fully offset revenue losses. If a 100 percent fee reduction (waiver) generated a 97 percent increase in transaction values, then a 50 percent fee reduction might plausibly generate a 30-50 percent increase in volumes, depending on price elasticity assumptions. Under such scenarios, providers’ total revenue might decline less dramatically than the fee reduction percentage might suggest.

However, several caveats apply to extrapolating from the pandemic experience. The fee waivers occurred during extraordinary circumstances when government restrictions on movement and social distancing guidelines strongly discouraged cash usage and encouraged digital alternatives. Users may have increased mobile money adoption and usage due to health safety concerns rather than purely cost considerations. Additionally, the waivers were understood as temporary emergency measures rather than permanent price reductions, potentially affecting behavioral responses.

Nevertheless, the pandemic experiment demonstrated that meaningful portions of Kenya’s population would utilize mobile money services more extensively if costs declined, supporting the CBK’s rationale that high fees represent genuine barriers to deeper financial inclusion rather than simply reflecting providers’ need to cover costs and earn reasonable returns.

Stagnating Growth and Persistent Exclusion Gaps

The CBK’s policy document candidly acknowledges that despite Kenya’s global leadership in mobile money adoption, recent data shows signs of plateauing growth in both account registrations and active usage. After years of explosive expansion that positioned Kenya as the world’s mobile money exemplar, growth rates have moderated as the market approaches saturation among accessible populations with the means and motivation to use digital financial services under current cost structures and product offerings.

This growth deceleration concerns policymakers because it suggests that the mobile money revolution, while transformative for tens of millions of Kenyans, may be failing to reach the most marginalized populations who could benefit most from financial inclusion. Those still excluded from regular mobile money usage disproportionately include rural populations in areas with limited agent networks and mobile network coverage, extremely poor households for whom even reduced transaction fees represent meaningful expenditures, elderly Kenyans who may lack familiarity with mobile technology, women facing cultural barriers or lacking independent control over household resources and technology, and pastoralist and other mobile populations whose lifestyles complicate service delivery.

Rural-urban divides persist despite mobile money’s theoretical ability to bridge geographical barriers. Rural areas face infrastructure constraints including unreliable electricity limiting agent operations and device charging, weak mobile network coverage affecting service reliability, limited agent density requiring long distances to access cash-in/cash-out services, and lower incomes reducing ability to pay transaction fees. These structural barriers mean that rural Kenyans, who represent roughly 60-65 percent of the national population, utilize mobile money services less intensively than urban counterparts despite potentially benefiting more from services enabling remittance receipt, bill payment, and financial savings without requiring travel to distant bank branches.

Gender gaps in financial inclusion represent another persistent concern. While mobile money has narrowed male-female gaps in financial access compared to traditional banking, women still lag men in account ownership, active usage, and access to advanced services like credit and insurance. These gaps reflect complex factors including lower female income and asset ownership, cultural norms restricting women’s independent economic decision-making in some communities, lower digital literacy among women on average, and product designs that fail to address women’s specific needs and constraints.

The CBK notes that barriers like device ownership (women are less likely to own smartphones), digital skills gaps (lower average digital literacy), and socio-cultural limitations continue hindering women’s full participation in the digital economy. Addressing these gender dimensions requires targeted interventions beyond fee reductions, including financial literacy programs designed for women, products addressing women’s specific needs for secure savings and emergency funds, and community-level engagement addressing cultural barriers to women’s financial independence.

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Limited Uptake of Advanced Financial Products

Beyond basic person-to-person transfers, mobile money platforms in Kenya offer increasingly sophisticated financial products including digital credit facilities allowing instant small loans, insurance products covering health, life, agriculture, and other risks, savings accounts earning interest, and merchant payment systems enabling cashless commerce. Despite provider investments in developing these offerings, uptake remains limited relative to the vast mobile money user base.

Digital credit through platforms like M-Shwari (a joint Safaricom-Commercial Bank of Africa product), KCB M-Pesa, and Fuliza (overdraft facility) has reached millions of Kenyans, providing convenient access to short-term liquidity for emergencies and consumption smoothing. However, these products have generated controversy over high effective interest rates, limited transparency in terms, and negative credit bureau reporting affecting users’ future borrowing capacity. Many borrowers struggle with debt cycles, taking new loans to repay previous borrowing, suggesting that products may not optimally serve users’ financial health.

Mobile-based insurance similarly shows limited penetration despite potential value for managing risks facing low-income households. Products like Bima (offering life and hospitalization coverage) and agriculture insurance schemes provide genuine protection, but awareness, trust, and understanding remain low. Many potential users don’t appreciate insurance concepts, question whether providers will actually pay claims, or simply cannot afford premiums even for micro-insurance products.

The CBK identifies multiple factors explaining limited advanced product uptake including high transaction costs making frequent interactions with savings or payment products expensive, limited interoperability between mobile money platforms and with banks hindering seamless financial management, low financial literacy leaving many users unable to understand products or assess whether they meet needs, and product designs not reflecting the realities of underserved groups’ financial lives, needs, and constraints.

Addressing these uptake challenges requires comprehensive approaches combining cost reductions to make frequent product interactions affordable, enhanced consumer protection and transparency building trust in financial products, expanded financial education helping users understand and effectively utilize available services, and improved product design creating offerings genuinely aligned with poor and rural Kenyans’ circumstances.

Interoperability: The Missing Link in Kenya’s Mobile Money Ecosystem

The CBK’s policy document highlights limited interoperability as a significant barrier to deeper mobile money usage and financial inclusion. Interoperability refers to the ability to transact seamlessly across different mobile money platforms and with bank accounts without facing high costs or technical barriers. Despite Kenya’s advanced mobile money ecosystem, interoperability remains limited, forcing users to maintain multiple accounts and face high costs for cross-platform transfers.

Safaricom’s M-Pesa and Airtel Money operate as largely separate ecosystems with limited interconnection. Sending money from an M-Pesa account to an Airtel Money account typically requires withdrawing cash from M-Pesa, then depositing it into Airtel Money—a costly and inconvenient process involving two sets of transaction fees and agent commissions. While some interoperability initiatives have launched, including PesaLink enabling instant transfers between bank accounts and mobile wallets, adoption remains limited and user experience often proves cumbersome.

This interoperability deficit creates several problems including forcing users to concentrate on whichever platform their contacts use, reinforcing M-Pesa’s dominant position through network effects, limiting competitive pressure that might otherwise constrain fee increases, and complicating merchant payment acceptance since businesses must maintain accounts across multiple platforms. International experience from countries like Tanzania, where regulators mandated mobile money interoperability, suggests that compelling providers to interconnect can increase overall usage, enhance competition, and reduce costs for consumers.

The CBK has indicated that improving interoperability represents a priority alongside fee reduction in the broader financial inclusion strategy. Implementing true interoperability would require technical system integration across providers, agreement on revenue sharing arrangements for cross-platform transactions, regulatory oversight ensuring fair terms and preventing anti-competitive behavior, and consumer education helping users understand and utilize interoperability features.

Regulatory Authority and Implementation Challenges

The CBK possesses statutory authority under Kenya’s National Payment Systems Act to regulate payment systems including mobile money platforms. This authority encompasses licensing providers, establishing operational standards and consumer protection requirements, supervising compliance with regulations, and intervening to protect public interest including through fee regulation if necessary.

However, implementing mandated fee reductions involves substantial complexity and potential unintended consequences requiring careful consideration. Mobile money providers will likely resist aggressive fee caps, arguing that current pricing reflects legitimate costs including agent commissions (typically 30-40 percent of fee revenue), technology infrastructure investment and maintenance, fraud prevention and security systems, customer service operations, and reasonable profit margins for shareholders. Providers may warn that forced fee reductions necessitate service cutbacks including reduced agent commissions potentially causing agent network contraction, decreased investment in platform improvements and new features, or reduced financial inclusion initiatives and consumer education.

These arguments carry some validity—mobile money platforms do incur real costs, and excessively punitive regulation could undermine service quality or expansion. However, the CBK appears to have concluded that current fee levels exceed what competitive market conditions would produce, with M-Pesa’s dominant market position enabling quasi-monopoly pricing that extracts excessive rents. In this regulatory view, fee reduction mandates correct market failures rather than imposing uneconomic constraints.

Implementation will require careful calibration of fee caps to balance competing objectives of affordability for users, sustainability for providers and agents, and continued innovation and service expansion. The CBK may adopt differentiated approaches such as lower caps for basic person-to-person transfers while allowing higher fees for premium services, graduated implementation providing providers time to adjust operations, and periodic reviews adjusting caps based on market conditions and cost evolution.

The regulator must also anticipate potential circumvention strategies providers might employ including restructuring fees to concentrate charges on less-regulated transaction types, reducing service quality or availability rather than explicit pricing, imposing or increasing other fees and charges not covered by person-to-person caps, or pressuring agents to extract unofficial charges from customers. Effective regulation requires monitoring and enforcement preventing such workarounds.

Regional Context and International Comparisons

Kenya’s mobile money fee debate occurs within a broader African context where numerous countries have developed mobile money ecosystems of varying sophistication and regulatory approaches. Comparing Kenya’s experience with regional peers provides useful perspective on fee levels, regulatory interventions, and outcomes.

Ghana experienced significant controversy when government attempts to impose taxes on mobile money transactions in 2022 generated strong public resistance and opposition from mobile money providers. The taxes, partially aimed at revenue mobilization for government, increased user costs significantly and reportedly reduced transaction volumes. This experience illustrates the political sensitivity of mobile money pricing and the challenges governments face balancing revenue, inclusion, and provider sustainability objectives.

Tanzania provides an interesting contrast where regulators mandated mobile money interoperability several years ago, requiring providers to enable cross-platform transfers at reasonable costs. Initial implementation faced technical and commercial challenges, but over time, interoperability improved competitive dynamics and user experience. Tanzania’s example suggests that bold regulatory interventions, despite provider resistance, can yield positive outcomes if implemented thoughtfully with appropriate technical support and enforcement.

Uganda has one of Africa’s highest mobile money penetration rates and similarly faces policy debates about balancing innovation, inclusion, and appropriate regulation. The country experimented with mobile money taxes that similarly generated backlash and usage declines, eventually leading to policy modifications. Uganda’s experience reinforces lessons about the price sensitivity of mobile money users and risks of policy missteps.

Comparing mobile money fees across African markets reveals significant variation reflecting differences in market structure, provider strategies, regulatory approaches, and cost environments. Kenya’s fees, while having declined from earlier peaks, remain relatively high compared to some regional peers, potentially supporting CBK arguments that further reductions are feasible without fundamentally undermining provider viability.

The Path Forward: From Proposal to Implementation

The CBK’s fee reduction proposal currently represents policy intent rather than implemented regulation. Translating this proposal into enforceable rules will require several steps including formal regulatory process with public consultation allowing stakeholder input, detailed analysis of cost structures and appropriate fee levels, development of specific regulatory instruments establishing fee caps and implementation timelines, and monitoring and enforcement mechanisms ensuring compliance.

This process will inevitably feature intensive engagement between regulators and mobile money providers, with Safaricom particularly invested in protecting M-Pesa’s profitability. The provider may present detailed cost data arguing that proposed fees would prove uneconomic, potentially threatening service quality or expansion. Alternatively, Safaricom might propose graduated reductions over extended timelines allowing operational adjustments, or suggest alternative approaches such as free basic transaction tiers with fees for larger transfers or premium services.

Consumer advocacy groups, development organizations, and financial inclusion advocates will likely support aggressive fee reductions, arguing that current charges constitute exploitative pricing enabled by market dominance and that lower fees represent essential tools for advancing inclusion and poverty reduction. These stakeholders may push for even more aggressive interventions than the CBK initially proposes.

The outcome will likely involve negotiation and compromise producing fee reductions meaningful enough to advance inclusion objectives while sustainable enough to maintain provider participation and service quality. The CBK holds significant regulatory leverage, but overly aggressive or poorly designed intervention could prove counterproductive if it triggers service degradation or provider withdrawal from less profitable segments.

Conclusion: Balancing Innovation, Inclusion, and Sustainability

Kenya’s proposed mobile money fee reduction represents a pivotal moment in the evolution of the country’s celebrated digital financial ecosystem. The intervention reflects tensions inherent in mobile money’s dual nature as simultaneously a commercial service operated by profit-seeking companies and a critical public utility affecting livelihoods and opportunities for millions of citizens.

The CBK’s diagnosis that high transaction costs constrain deeper financial inclusion and that current fees exceed competitive levels appears well-founded based on available evidence. The proposed fee reductions, if implemented thoughtfully, could generate substantial benefits including billions of shillings in savings for Kenyan households, increased mobile money usage advancing inclusion objectives, expanded uptake of advanced financial products like savings and insurance, and demonstration effects encouraging other African countries to address similar issues.

However, implementation challenges and risks require careful management to avoid outcomes that might ultimately harm the constituencies these policies intend to help. Preserving provider incentives to invest in network expansion, platform improvements, and product innovation; maintaining agent network viability and preventing service access deterioration; and ensuring that fee reductions actually reach consumers rather than being offset by other charges all represent legitimate concerns requiring regulatory attention.

The success of Kenya’s fee reduction initiative will depend on the CBK’s ability to balance competing considerations through evidence-based policymaking, effective stakeholder engagement, careful regulatory design, and vigilant monitoring and enforcement. Done well, the intervention could mark another chapter in Kenya’s mobile money success story—demonstrating how thoughtful regulation can enhance innovation’s benefits while addressing market failures and ensuring that revolutionary technologies serve all citizens, not just those who can easily afford them. The coming months will reveal whether regulators, providers, and stakeholders can navigate these complex trade-offs to advance Kenya’s financial inclusion vision while sustaining the mobile money ecosystem that has become integral to the nation’s economic infrastructure.

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By: Montel Kamau

Serrari Financial Analyst

29th September, 2025