Bus operators in Kenya on Tuesday unveiled plans for a cashless fare system aimed at protecting passengers from theft and police extortion which they say siphon a third of their revenue away.

The scheme will see public minibuses known as matatus equipped with technology that allows users to pay fares using a popular mobile phone-based money transfer service.

Simon Kimutai, chairman of the Matatu Owners Association, said around a third of passenger fares is lost at the end of each route because of theft or bribery, including by Kenya's traffic police.

"We lose over 30 percent of the revenue collected on a daily basis. For a long time, the matatu business has had no rules, but we hope this will give us a solution," he told reporters.

Kimutai said the system, which is already undergoing tests along several routes in the capital Nairobi, is expected to be fully operational by July 1 -- in accordance with government directives to stop the use of cash and improve security on the network.

The police has repeatedly been ranked as the institution perceived as most corrupt by Kenyans in surveys conducted by the international watchdog Transparency International.

Transport in Kenya has been targeted in recent months by militants suspected of links to neighbouring Somalia's Al-Qaeda-linked Shebab rebels, with buses hit by grenades and bombs, while petty crime is also common on the matatu network.

Officials said the new electronic system will also include security cameras and the ability to track each vehicle.

According to Kimutai's organisation, some 1.5 million people depend on matatus every day across Kenya, where there is no state-run public transport system.