Mobile phone operator Safaricom has been sued by some of its subscribers for charging interest on its emergency airtime service, Okoa Jahazi.
In a suit filed at the High Court in Nairobi on 17th May 843 Safaricom subscribers – led by Nairobi residents Arshford Koome and Eric Kithingi – argue that the leading mobile operator is not a licensed lender and the credit facility is not regulated by any banking or financial law.
Breached banking laws
The applicants had earlier in February this year filed the petition on Safaricom and the Ministry of ICT under which mobile telecommunication operators fall.
In the petition, and subsequent case, filed through Mutwiri Arimi & Company Advocates, the petitioners say the credit platform charges an interest rate of 10% of the requested “as if it’s a banking institution, literally translating into 120% p.a. interest.”
They argue that OKOA Jahazi (loosely translating to “emergency saviour”) credit is deducted from subscribers’ airtime purchases upfront contrary to banking laws.
They are seeking compensation for the illegally charged interest and breach of their consumer and constitutional rights. The other argument is that Safaricom rolled out Okoa Jahazi without published terms and conditions, thereby exposing users to indiscriminate tariff/airtime charges and other adversities.
If it goes to full hearing, it will be a precedent setting consumer case in the fast-growing mobile industry. A favourable ruling for the applications could expose Safaricom, which recently announced a net profit of Ksh45 billion, to a huge compensation bill for those of its nearly 30 million subscribers who have used the service.
According to the case documents seen by Business Today, Koome and Kithinji et al argue that neither Safaricom nor OKOA Jahazi is registered under the national Money Lenders’ Law as a money lender.
They conclude that based on this, OKOA Jahazi is operating illegally. Safaricom is yet to reply to this suit.
The case seeks to have a forensic audit of OKOA Jahazi and declaration of the platform is illegal and unconscionable as well as a predatory scheme on low-income mobile consumers.
The petitioners want all the charges levied on Okoa Jahazi accounted for since it was incepted eight years ago. The mobile operator launched the service to save subscribers with no airtime fund to borrow from it in advance and pay later, of course at a 10% fee. Okoa Jahazi airtime advanced is deducted in the next top-up(s) until fully recovered.
OKOA JAHAZI COST SCHEDULE
|Requested Amount (KSHs.)||Service Fee (KSHs.)||Airtime Received (KSHs.)|
If, for example, you request Ksh50 airtime, you will receive Ksh45, which means Ksh5 will have been deducted in advance. In your next top-up, Ksh50 will be deducted which is the original amount you had requested for. The amount requested must be equivalent to your airtime spend for the last seven days. That is to say, for you to request Ksh100, you must have used airtime worth Ksh100 over the past seven days.
The applicants have also revisited the sticky issue of Safaricom’s market dominance. They are seeking a declaration that Safaricom has illegally dominated the local mobile telecommunications sector to the detriment of the petitioners and other mobile users.
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“Through this dominance (without operational efficiency), Safaricom has been unfairly exploiting the petitioners and other users through the OKOA Jahazi service and other platforms like M-Pesa,” they argue in the case.
Safaricom main rival Airtel Kenya has been pushing the dominance debate for some time now but a recent report absolved the operator from monopolistic accusations.
They say the mobile operator is operating in contravention of Article 6 of the Constitution of Kenya 2010, The Competition Act 2010; The Consumer Act 2010; The Kenya information and Communications (Fair Competition and Equality of Treatment) regulations among other statues.