Firms embrace e-money transfer for dividend pay

Kenyan companies are adopting electronic funds transfer as a method of paying dividends and other dues to shareholders in a move meant to enhance efficiency and reduce costs incurred in tracking uncollected cheques.

The move comes in the wake of rising cases of unclaimed cheques either because investors did not update their postal addresses or the amounts paid in dividend were so small that they opted not to cash the cheques.

Kenya Airways will be the latest listed firm to endorse electronic funds transfer (EFT) and use of the mobile money system if stakeholders give the agenda a nod at the upcoming annual general meeting.

Several firms have already moved to ETF and mobile money transfer services as alternative methods of dividend payment as opposed to the traditional cheque system.

Safaricom, the largest firm in Kenya by market capitalisation, last year paid Sh956 million in dividends of which Sh430 million or 45 per cent was paid using the traditional cheque method, Sh369 million or 39 per cent was paid using Real Time Gross Settlement (RTGS), Sh99 million or 10 per cent was paid using EFT, while the remaining Sh57 million or six per cent was paid using its mobile money transfer service, M-Pesa.

During a recent media briefing, Les Baillie, Safaricom’s Chief Investor Relations Officer, said that by July 100 per cent of payments made via M-Pesa had been received, compared to 99, 98, and 84 per cent of the amounts paid through EFT, RTGS, and cheques respectively.

“We are still stuck with Sh66 million in unclaimed dividend cheques and are planning to convince our shareholders at our next AGM to embrace mobile money payment solutions as it has proven to be more efficient for the company,” said Mr Baillie.

According to the firm, dividend disbursement using electronic methods was more successful, with cheque delivery experiencing logistical difficulties due to errors in postal addresses and delays.

“What we are doing now, particularly to retail shareholders, is to encourage them to use M-Pesa because 100 per cent of shareholders who opted to use M-Pesa have received it (money). We hope to increase this significantly this year and are also trying to contact shareholders whose dividends are outstanding from last year to have them register with M-Pesa,” added Mr Baillie.

Unbanked cheques

Kenya Power and Lightening Company (KPLC) Corporate Communications Officer Kevin Sang said “several foreign shareholders have been receiving dividends through EFT, while others request for foreign drafts.

“Some local shareholders come to us for cash payment and the rest present their cheques to their banks.”

East African Breweries Limited Director of Corporate Affairs Ken Kariuki said the company, “has 24,779 shareholders who hold less than 5,000 shares as at the close of the last financial year.

“As such, we are considering other methods such as use of mobile money to make their dividends available to them.”

He said the company found it efficient to pay amounts over Sh1 million using RTGS and would vouch for mobile money transfer for those receiving lesser payouts.

“We also make payments through the electronic transfer payment system to shareholders who request to be paid in this way.

“For the other shareholders, we are reviewing our dividend payment methods and hope to make other methods available in the near future. We have not used M-Pesa as yet, but it is one of the methods that we will be exploring,” he added.

“Dividend payment has always been an issue for many companies. Last year the bulk of about 50 per cent or Sh430 million was issued via cheque. About 180,000 investors received their dividends via M-Pesa,” Mr Baillie said.

“The fact that we have all these unbanked cheques means that a large number of our shareholders have not yet received their dividends, partly because some have not updated their addresses with us while others simply have not bothered to cash them because the cost of cashing them could be more than the cheques,” Mr Baillie added.

Less expensive

Electronic methods of payment are faster, more secure, more efficient, and less expensive.

“Paying dividends through RTGS, EFT and directly to shareholders’ bank accounts is faster and safer than sending dividend cheques directly to shareholders’ registered addresses where they get lost or are misplaced due to lack of  address codes and interception by fraudsters,” said Mr Sang of KPLC.

“Shareholders consider some of the existing modes of payment as restrictive and therefore we reckon that they would welcome alternative methods of dividend payment,” Mr Kariuki said.