BD Insider, Letter 146: Nigeria's card market heats up

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"We take compliance seriously," these words by the CEO and co-founder of Fincra, Wole Ayodele seem to be on the lips of many fintech founders in Africa, as they look to legitimise their startup.

While Fincra received a commercial licence to operate as a Payment Service Solution Provider (PSSP) in Nigeria, two other fintechs operating in Nigeria secured licences elsewhere.

First, Chipper Cash, secured a licence to provide money transfer services in Malawi—a landlocked country in Southern Africa with ~10 million adults.

Second, Kuda received a digital banking licence from the State Bank of Pakistan to operate in the country.

In letter 146, we examine:

the plan to monitor Kenyan's usage of M-Pesa to curb tax evasion
Nigeria's national card scheme launch
how ChatGPT content moderators in Africa were underpaid and sacked

and other noteworthy information like:

the latest African Tech Startup Deals
opportunities, interesting reads and more

The big three!

Mobile money as a tool for Government regulation in Kenya

An M-Pesa kiosk in Kenya

Last week, we told you that a Kenyan High Court has asked Safaricom and the Central Bank of Kenya (CBK) to pause the re-introduction of M-Pesa charges for transactions involving a bank account.

Well, mobile money in Kenya—perhaps, one of the country's most talked about successes—is back in the news again.

The news: The Kenyan government is proposing to monitor the M-Pesa accounts of its residents to curb tax evasion. This proposition is contained in the Budget Policy Statement (BPS) 2023 [pdf] which was released last Wednesday (January 18, 2023).

According to the statement, the Kenya Revenue Authority (KRA) will use systems that will gather intelligence on business production trends, people's usage of mobile money and ownership of properties. Its system will be linked with telecoms and gaming platforms to ensure compliance.

Context: KRA has been tasked with a goal to double its annual collections from Sh2.1 trillion to over Sh4 trillion ($32.338 million). The tax collector is introducing new initiatives to enable the achievement of this goal, including the introduction of a 16% value-added tax (VAT) on digital services.

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The new policy will track compliance with Kenya's 16% VAT on sales, and 20% excise duty on transactions.

Why it matters: "There are only seven million people with [tax] pin numbers," Kenya President, William Ruto, said. "At the same time, in the same economy, Safaricom's M-Pesa has 30 million registered customers, transacting billions daily."

Kenya is one of the biggest mobile money (MoMo) markets in Africa. According to the CBK, the East African country recorded $58 billion in MoMo transaction volume, last year, excluding December.

Zoom out: "KRA integrating tax system with M-Pesa is a really bad idea. Not only is it an invasion of privacy, but individual cash flow on M-Pesa is never a reflection of earnings. It is going to give misleading information and land a lot of small traders in trouble," John Danson, a social commentator, tweeted.

Kenyan authorities will need to clearly define what they intend to tax because an undefined taxation system might cripple businesses in the country.

💬 The Insider's perspective

Is it wise to offer BNPL in a country where credit histories or scores are limited?

Hear from Fehintolu Olaogun, CEO and co-founder of the Nigerian fintech, Credpal which partnered with Bolt to launch a ride now, pay later option for users.

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We understand the concern of limited or no credit history among many African consumers. That's why we have developed a cutting-edge credit scoring model that incorporates credit-building features to ensure only credit-worthy customers are approved.

We work with all the credit bureaus in our scoring process and also report repayments, which further enriches the continent's credit data. This integration is one of the most scalable and sustainable ways of driving credit inclusion, with low risk as initial limits are very low and customers can build their way to higher limits with good repayments.

CBN's national domestic card scheme becomes operational

Some of the CBN's functions | Credit: Benjamindada.com

The news: Last week, the national domestic card scheme by the Central Bank of Nigeria (CBN) and the Nigeria Inter-Bank Settlement Systems (NIBSS) became operational.

According to Premier Oiwoh, Managing Director of NIBSS, "the card would be optimised for local content solely for the Nigerian market and support micropayment and credit, e-government, identity management, transportation, health and agriculture regarding payment."

The card payment scheme processes payments using debit and credit cards. However, the CBN is yet to disclose the procurement cost and operational charges.

Why it matters: In 2021, the annual value of card transactions in Nigeria was $18.2 billion. The market is expected to grow at a compound annual growth rate (CAGR) of more than 18% between 2022 to 2025, according to a 2022 report by GlobalData.