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Kenya’s M-Pesa sees consumer, business services opportunities in COVID-19

By David Whitehouse
Posted on Friday, 7 August 2020 13:31

A customer sets up an M-Pesa account.
A customer sets up an M-Pesa account. Reuters/Thomas Mukoya

M-Pesa is planning a consumer “lifestyle” offering as it seeks to deepen clients’ use of its mobile-money application, Sitoyo Lopokoiyit, interim CEO of M-Pesa Africa, tells The Africa Report.

Consumer choices of goods and services will be embedded into the M-Pesa app in the new product, Lopokoiyit says. The offer, planned within the next 12 months, will probably be launched first in Kenya and then extended to other African markets.

The M-Pesa mobile-money service, founded in 2007 by Vodafone and Safaricom, is used by over 200,000 African businesses to make payments. The COVID-19 pandemic has had a big impact on small and medium-sized enterprises (SMEs), which account for about for about 40% of Kenya’s GDP.

READ MORE M-Pesa paved the way – but can others follow?

Lopokoiyit says that this could be as an opportunity to provide tools that can help SMEs to track and manage their cash inflows and payments, as well as support them in accounting, inventory and supply-chain management. “We want to be more of a partner” for SMEs.

  • Capital expenditure has been continuing as normal at M-Pesa, and the company is hiring rather than looking to cut jobs, he says.
  • “This is not a time to contract.”

Lopokoiyit is also chief financial services officer at Safaricom, which, alongside South Africa’s Vodacom, completed the acquisition of the M-Pesa from Vodafone in April. An announcement on the permanent head of M-Pesa Africa will be made in due course, he adds, without elaborating.

READ MORE Vodacom and Safaricom in the driver’s seat for M-Pesa

M-Pesa is in the process of becoming an open platform for financial services. “Financial institutions are starting to leverage on our platforms,” he explains. “Anyone can plug in.”

  • Non-performing loans (NPLs) on digital Safaricom-partnered products have been less than 2% during the COVID-19 pandemic and the loan portfolio is “still performing well”, Lopokoiyit says.
  • Extensions to loan repayment periods have been granted when necessary.
  • M-Pesa has sought to help users by cutting transfer costs, making transfers under $10 free, he explains.
  • M-Pesa is working with the regulator to address the issue of counterfeit phones being used in Kenya. Taxes on phone use, he argues, need to be kept low. “We need smartphone prices to come down.”

In the cloud

M-Pesa achieved its early success by giving people in Kenya’s cities a secure and instant way to send money to family members in rural areas. That network now provides the basis to build a wider range of services. During the pandemic, Kenya’s government has used the M-Pesa mobile wallet to make cash transfers to vulnerable households.

The growth of cloud computing is a trend that M-Pesa hopes to exploit. Servers that are accessed via the internet and are located in data centres are referred to as the “cloud”. Using them means that companies don’t have to manage their own servers or run software on their own machines.

  • M-Pesa is looking at the cloud as a way to offer more services. The key advantage is that that fewer people are needed in offices to manage systems, Lopokoiyit says.
  • The shift to the cloud, which was three to five years down the line, has been accelerated as a result of COVID-19, he says.
  • “Ways of working have changed. Many people will never come back to the office.”

M-Pesa is scanning new markets in Africa, but the priority in terms of geographical expansion is to achieve the same kind of scale in countries such as the Democratic Republic of Congo, Mozambique and Lesotho as has been achieved in Kenya, he adds. M-Pesa remains keen to enter Ethiopia, but it’s “too soon” to say when that might be possible.

The Bottom Line

M-Pesa is better placed than most to take advantage of higher demand for digitally delivered services.

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