The probe into the system, which targets the unbanked mobile phone user, follows news that Safaricom is to team with Western Union to offer cross-border mobile remittamces.

M-Pesa has so far attracted four million subscribers and has become a template for the entry of telecomms firms into the burgeoning mobile finance market in emerging economies in Africa and Asia.

The business currently operates outside existing banking regulations and has spooked financial institutions who claim that some users treat it like a bank deposit account.

Safaricom's chief executive Michael Joseph told the Nairobi Business Daily that he welcomed the audit, saying it would prove that M-Pesa is a reliable money transfer service.

"We welcome the audit because it will verify the concerns and satisfy the regulator that we have put safeguards and the risks are minimal," he told the paper.

In July last year, Vodafone and Nokia issued a policy paper calling for an overhaul of the regulatory framework in emerging economies that would open up the market for deposit-taking, clearing systems, and know-your-customer rules to incorporate the activities of mobile operators.

Minister orders audit of Safraricom's M-Pesa service - Business Daily