Through Morris Kiruga, in Nairobi
Posted on Friday, March 8, 2019 7:17 PM, updated on Monday, March 11, 2019 5:00 PM

Kenya’s leading telecom operator, Safaricom, was looking for a new revenue generator. And it looks like they found one.

Through Fuliza, a new overdraft facility managed in partnership with KCB Group and the Commercial Bank of Africa, Safaricom aims to serve 14 million M-Pesa users and generate KSh 5.3 billion over the next year.

  • A news note by Sterling Capital Limited estimates that the new service will increase M-Pesa’s revenue by 2.6%, bringing M-Pesa’s contribution to Safaricom’s total revenue to 32%.
  • The feature film got off to a promising start, lending $ 10 million to a million customers in its first week, and $ 60.2 million 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 complete within two days. The overdraft facility is intended to bridge this gap, allowing people to transact and pay off the overdraft later.

  • Mobile loans often charge astronomically high interest rates, but that hasn’t stopped their rapid growth in Kenya. Lack of sufficient credit facilities and a credit limit have prompted many to seek short-term loans from loan sharks and fintech products, most of which are designed to work through M-Pesa.
  • Fuliza attracts a 1.083% daily interest rate, or an annual rate of 395.3%. The facility has a significantly lower risk of default as it is automatically deducted from M-Pesa deposits or receipts.

Meanwhile, in the larger market, Safaricom’s competitors Airtel Kenya and Telkom Kenya announced plans for a joint venture in February. This would bring their combined market share to 31%.

  • The company, whose details announced so far suggest it would operate as a merger, would give them a combined market share of 31% and better luck in a market that has been difficult for Safaricom’s competitors to break through.
  • CEO of Safaricom, Bob collymore, welcomed the plans, saying they would give telecom operators the critical mass they need “to operate reasonably.”
  • The business, however, was criticized by a parliamentary committee March 5 which stated that “the deal has all the hallmarks of a scandal where individuals buy a public entity through the back door for a song.” Telkom is 40% owned by the Kenyan government.

At the end of the line : If the merger goes through, Safaricom, which might have feared that another successful product launch would rekindle fears of a monopoly in the market, will be able to sleep easier.

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