Central Bank defends thin SIM card licence issued to Equity Bank

Central Bank of Kenya (CBK) Governor Prof Njuguna Ndung'u during the National Digital Registry Service Financial Services Sector briefing at the Serena Hotel on October 23, 2014. Central Bank and the Communication Authority of Kenya were part of the committee that licensed Equity Bank to roll out the thin SIM cards. FILE PHOTO | DIANA NGILA | NATION MEDIA GROUP

What you need to know:

  • Defending the Central Bank, the governor said it was normal to allow a telecommunication provider to test its mobile financial service for a year.
  • They said the regulator did not do an independent laboratory test on the thin SIM card before allowing its distribution in the market.

Equity Bank was licensed to roll out the thin SIM cards based on a report by a committee comprising officials from the Central Bank and the Communication Authority of Kenya.

The team studied the technology and visited countries where the cards have been used to learn from their experiences.

Central Bank Governor Njuguna Ndung’u told MPs on Thursday that the committee was formed to address concerns raised about the new technology after Equity expressed interest in introducing it.

The committee comprised senior officials from the two market regulators.

“What we would like to see is a reduction in the cost of doing business. We relied on our experts who informed us that thin SIM cards have been used by other countries but not for financial services just like M-Pesa,” Prof Njuguna said.

Defending the Central Bank, the governor said it was normal to allow a telecommunication provider to test its mobile financial service for a year.

“In 2007, we told Safaricom that they were going to test M-Pesa for a year. This was to allow us to monitor the risks and develop ways to counter them. There is no way you can test a service in closed system. It is the same for Equity,” said the governor, when he appeared before the Committee on Energy, Information and Communication.

NO INDEPENDENT TEST

The lawmakers, however, took issue with the way the CA went about approving the request by the bank.

They said the regulator did not do an independent laboratory test on the thin SIM card before allowing its distribution in the market.

 “We are unhappy that you allowed Equity to begin rolling out the SIM cards without doing an independent laboratory test on them. It is not enough to say you received a report on a test done by the bank,” Rarieda MP Nicholas Gumbo, who chaired the session, said.

Equity is already issuing the cards after getting the nod from the regulator.

MPs are investigating the issuance of the licence to the bank and have already questioned Information Cabinet Secretary Fred Matiang’i.

On Thursday, they interrogated CA’s director consumer and public affairs, Mr Mutua Muthusi, and Mr Perminus Karungu at Continental House, Nairobi.

“The SIM card has many risks. It is possible to intercept information using thin SIM cards. We are putting our people’s security in the custody of Equity. Malice alone cannot be reason to want to intercept information. Anyone can develop software to tamper with this technology,” said Vincent Musyoka, Mwala MP.

Mr Muthusi defended the authority, saying it had acted in the interest of the public and had allowed Equity to offer the service for a year as the regulator monitors its progress.