Safaricom unveils savings platform in war with banks

M-Pesa has around 20 million active users in Kenya. FILE PHOTO | NMG 

By OTIATO GUGUYU
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Summary

• Safaricom has started testing the new product that will allow M-Pesa users to invest and earn a 10 percent annual interest, which will accrue daily.
• The new product, which caps savings at Sh70,000, will be known as Mali (Kiswahili for wealth) and aims to allow subscribers to invest easily without exit restrictions.

Safaricom is rolling out a new savings service on its M-Pesa platform in the telco’s latest onslaught on the banking sectors.

The company has started testing the new product that will allow M-Pesa users to invest and earn a 10 percent annual interest, which will accrue daily.

The new product, which caps savings at Sh70,000, will be known as Mali (Kiswahili for wealth) and aims to allow subscribers to invest easily without exit restrictions.

Savers will be able to invest money through USSD code *230 # or via a PayBill number. To qualify, one will be required to be a registered M-Pesa user for over three months.

“The product is supposed to encourage savings where you can put in money and withdraw the next day, but you will have earned something on the money since interest is calculated per day,” said a top Safaricom executive, adding that other partners are involved in the firm’s latest savings product. At 10 percent, Safaricom will be offering nearly double the current interest that banks are paying on savings.

“We view the combination of lending and wealth management services as a further boost to earnings from financial services,” Standard Investment Bank said in reference to Mali product. “The product which is yet to be launched officially, possibly includes a partner bank and a fund manager.”

Started 11 years ago as a service to allow Kenyans without access to the banking network to transfer money via mobile phones, M-Pesa now offers loans and savings in conjunction with local banks, as well as merchant payment services.

Safaricom launched the new overdraft feature called Fuliza on January 7 this year.

Fuliza is underwritten by Kenyan lenders KCB Group

and NCBA Group

, which already had partnerships with Safaricom to offer short-term loans on the M-Pesa platform. Fuliza lent out Sh140 billion in the first nine months, but part of the earnings from the service are shared with its partners.

“The current revenue sharing formula for the Fuliza product is 40:40:20 for Safaricom, NCBA and KCB respectively. KCB earned Sh484 million in the first half of 2019 in revenue from Fuliza, thus tota;ling Sh2.4bn for the entire product to end of June 2019, by our estimates,” Standard Investment Bank said in a note to investors.

It is not clear if the deposits in the new savings product will be used to back loans akin to the mode of operations in banks.

M-Pesa has around 20 million active users in Kenya and it has become the principal driver of Safaricom’s profit growth, as revenue from traditional voice and text services has flattened off. Safaricom currently offers a savings product in partnership with NCBA through M-Shwari with those saving up to Sh20, 000 earning annual interest of three percent, four percent for Sh50, 000 and five percent above Sh50, 000.

But the funds must be locked in for between one and 12 months and accessed after maturity. The new savings product does not have lock-in restrictions. It comes at a moment when banks have cut savings rate to 39-montth low, reflect the ongoing impact of removal of the floor interest rate last year that has seen lenders ride on cheap deposits for record profits. Official data shows average savings interest fell to 4.58 percent in September compared to 6.33 percent in the same month last year when Parliament made changes to the banking law and removed a clause that compelled banks to pay depositors at least 70 percent of base lending rate.