ICT law makes CCK a bank

March 9, 2009
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, NAIROBI, Kenya, Mar 9 – When the Kenya Communications Amendment Act (2009) was signed, the ICT industry hailed it as a win for Kenyans longing for electronic commerce and digital services.

The recognition of digital signatures, punishment for electronic crimes and the amendment of evidence laws to allow electronic records such as emails as evidence was lauded.

But the ICT sector was not quick to note the challenges posed by the introduction of a loan facility by the Communications Commission of Kenya (CCK) and the Universal Services Fund (USF), which will allow the Communications Commission of Kenya to raise money from the licensees.

Part VI (B) of the Communications Act (Section 84) provides for the establishment of the USF and stipulates that monies shall be raised from levies from licensees, parliament, investments by CCK and interests accruing from loans advanced by CCK.

While the Universal Services Fund will be important in improving access to rural areas which may not be attractive to the capitalistic telecom companies; it poses challenges too.

For instance, which licensees will be required to pay? All licensees or a particular cartegory? What will be the criteria for determining who pays and who does not?

Section 84P empowers the Minister for Communication and Information to make general regulations regarding the amount of levy, meaning that the minister can decide that different players pay different amounts, even though they are in the same license category.

What about the administration of the fund? Why has the Act left it to the board and the minister instead of a public-private sector partnership, yet the money will be raised from the private sector?

According to Charles Njoroge, CCK Director General, the USF will be administered by the CCK through a Universal Service Advisory Council as provided in the Act. The daily running will be by the CCK staff and the USF department.

The idea of the management of the USF is of great concern but Section 84M raises bigger issues; it stipulates that the Board may accept or reject any application for a loan, may grant the loan and impose conditions for the security as it may deem necessary.

The CCK board is also mandated to demand security and require repayments by installments within the period that the Board may deem fit. Just like in the financial sector, the Board is also empowered to vary the conditions the loan was given as well as the terms of repayment.

Mr Njoroge says that there are various options that will be considered concerning loan management among them being collaboration with financial institutions including microfinance institutions in the management, disbursement and recovery of funds, although this aspect is not alluded to in the Act.

The loan idea may have been well thought, but does CCK want to turn into a bank? Will the CCK have a new department charged with advancing loans, vetting applicants and attaching property for those who have defaulted repayment?

The independence of the CCK has been questioned in the past and questions still linger whether the Board is still susceptible to political manipulation. Besides, the Act has not stipulated that any loan granted must be in advancement of ICT related activities.

"The vetting of the loan’s recipient shall be on case by case basis and only the most viable and feasible projects shall be funded," said Mr Njoroge. "A comprehensive criterion will be developed to guide the process which shall be undertaken by the staff within the UA department under supervision of the Universal Service Advisory Council."

The Act further empowers the minister to make regulations regarding the conditions for the grant of the loan.  The idea of a loan may have been well intended; but it can allow for manipulation by the politicians, especially if the interest rate is below the market rate.

There is no doubt that there will be subsidiary legislation to support the Act but if the Act does not make some of the considerations very explicit, there is nothing that subsidiary legislation can do.

Legally, a subsidiary legislation can not override the Act, so if the minister decides to give loans under whichever conditions, the subsidiary legislation can not be used to stop the minister; because the Act gives the powers.

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