Safaricom mulls high-value loans with more bank deals

Safaricom wants to partner with more banks to build a marketplace for credit, allowing it to lend high-value loans without directly assuming the risk of the capital, as it looks for new ways to reverse its declining earnings.

The firm's CEO, Mr Peter Ndegwa, said in an interview yesterday after announcing a 22 percent drop in net profits for the full year ended March 2023 to Sh52.48 billion dragged down by heavy investments in Ethiopia, that the telco will be partnering with more banks to start offering term loans.

This is in contrast with the current arrangement where it is disbursing overdrafts that are repayable within 30 days.

“Fuliza was just an expression of emergency credit,” said Mr Ndegwa.

“For merchants, we could offer them overdrafts or term loans and expand the number of banks’ lending through our platform.”

Also Read: Ethiopia grants Safaricom M-Pesa licence

The move will mark yet another upgrade on the Fuliza product, which Safaricom launched in 2019 alongside KCB and NCBA, allowing individuals to complete transactions when they have insufficient funds in their M-Pesa.

Safaricom last week rolled out Fuliza ya Biashara, a service that will allow traders to access unsecured credit of between Sh1,000 and Sh400,000 by overdrawing on M-Pesa business tills to cover short-term cash flow shortfalls.

The telco is now thinking of welcoming more banks on board and venturing into high-value loans without having to build its balance sheet.

Not taking over the risk of the balance sheet may help Safaricom deepen its inroads in the financial services sector without having to have a Central Bank of Kenya banking license.

Safaricom has been shifting its business model away from voice and messaging, whose share in total revenue has been declining.

Also Read: Safaricom increases 5G coverage to 28 towns

The telco’s total service revenue in the financial year ended March 2023 grew by 5.2 percent to Sh310.9 billion, with M-Pesa accounting for Sh117.19 billion or 41.5 percent compared with 39.9 percent in the previous year.

The latest share of M-Pesa in service revenue is the highest in the history of the telco and has come on the back of the share of voice and SMS revenue declining due to customers’ growing preference for over-the-internet calls and messaging apps such as WhatsApp.

Voice and messaging five years ago commanded 47.2 percent of service while M-Pesa was at 31.2 percent.

This was when voice revenue hit the peak of Sh95.94 billion.

Safaricom yesterday announced a 22.2 percent fall in net profit for the financial year ended March 2023 to Sh52.48 billion from Sh67.49 billion posted in the previous year, majorly on increased operating expenses.

The profit fall is for the third straight year from the peak of Sh73.66 billion in the year ended March 2020 and becomes the lowest for the telco since 2017 when net earnings were Sh48.44 billion.

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