Kenya’s capital markets regulator fined three stockbrokers and suspended them for one and three years, in a high-profile insider trading case that threatened to derail the takeover of a listed oil company.
Safaricom rides high on new overdraft facility
Kenya’s leading telecoms operator, Safaricom, was looking for a new revenue driver. And it looks like they found one.
Through Fuliza, a new overdraft facility run in partnership with KCB Group and the Commercial Bank of Africa, Safaricom aims to serve 14 million M-Pesa users and generate KSh5.3bn in the next year.
- A topical note by Sterling Capital Limited estimates that the new service will increase M-Pesa revenues by 2.6%, bringing M-Pesa’s contribution to Safaricom’s total revenues to 32%.
- The feature had a promising start, lending $10m to one million customers in its first week, and $60.2m to 4.2 million customers by the end of the first month.
Why now? According to Safaricom, more than half of all daily M-Pesa transactions fail due to insufficient funds, only to be completed within two days. The overdraft facility is meant to close this gap, allowing people to complete transactions and refund the overdraft later.
- Mobile loans often charge astronomically high interest rates but this has not stopped their fast growth in Kenya. Lack of sufficient credit facilities and a credit cap have driven many people to seek short-term loans from loan sharks and fintech products, most of which are built to work through M-Pesa.
- Fuliza attracts a 1.083% daily interest rate, amounting to a 395.3% annual rate. The facility has a significantly lower default risk because it is automatically deducted from M-Pesa deposits or receipts.
Meanwhile, in the larger market, Safaricom’s rivals Airtel Kenya and Telkom Kenya announced plans for a joint venture in February. This would bring their combined market share to 31%.
- The venture, which details announced so far suggest would work like a merger, would give them a combined market share of 31% and a better chance in a market that has been hard to crack for Safaricom’s competitors.
- Safaricom’s CEO, Bob Collymore, welcomed the plans, saying it will give the telcos the critical mass they need “to be operating sensibly”.
- The venture, however, was criticised by a parliamentary committee on 5 March that said “the deal has all the hallmarks of a scandal where private individuals are buying off a public entity through the backdoor for a song”. Telkom is 40%-owned by the Kenyan government.
Bottom line: If the merger goes through, Safaricom, which might have worried that another successful product launch would re-stoke fears of a market monopoly, can sleep easier.