Equity is facilitating access to a bank account through a mobile phone. Photo/FILE
A report by Renaissance Capital projects Equity Bank’s earnings to increase by Sh4 billion in the next year following its partnership with mobile services provider Safaricom on its latest product, M-Kesho.
The savings account, which is accessible through mobile phones, is expected to boost the revenues of the country’s biggest bank by client base.
“Since Equity Bank will essentially outsource the M-Kesho operation, it will earn an average of 90 per cent of revenues attributable to M-Kesho. We calculate exclusive M-Kesho revenues of Sh4 billion for Equity,” says the report.
Equity has opened over 200,000 accounts on M-Kesho since its May launch, with an average 5,000 clients signing up for the service every day and each user making a transaction everyday.
The Bank, which has over 4 million customers, has carved a niche for itself by offering lower-priced services to its account holders.
Early this month, the bank announced a 46 per cent pre-tax half-year profit rise, posting a Sh3 billion return compared to Sh2 billion for the same period last year.
Local analysts said the development should give impetus to the growing number of local banks relying on the convergence of the financial and telecommunications sectors to push their growth in the coming five years.
By facilitating access to a bank account accessible through a mobile phone, Equity hopes that M-Kesho will enable individuals, small businesses, corporates and, eventually, the government, to save money in interest earning accounts, pay for goods and services as well as service loans and insurance payments using mobile phones.
Equity CEO James Mwangi, has stated that he hopes to convert most of Safaricom’s 9.5 million M-pesa subscribers into account holders in its bank, offering the bank access to users who for a long time have been out of the reach of the banking sector.
Through the integration of the bank’s network of over 80 branches with 17,500 M-Pesa agents, Equity will also boost its presence in rural areas where accessibility to financial services has locked a large portion of the population out of the system
The product has heralded renewed interest in the market possibilities offered by mobile phones in reaching the unbanked in Kenya, spurring development of similar products such as Pesa Pap from Family Bank and pushing the creation of policies in the finance industry.
Central Bank governor Njuguna Ndung’u said that the two companies were offered an exemption in order to create a unique agency network. In addition, a new agency banking law had to be created in order for Equity’s product to be approved for use in Kenya.
The combination of cheap financial services and increased mobile accessibility is expected to boost the country’s chances of increasing its savings to 25 per cent of the country’s GDP - a target outlined in Vision 2030.
Provide longevity
Renaissance said that the product would provide longevity to Equity’s presence.
“We believe the case for Equity Bank is no longer about its 2010E earnings potential, but all about 2011E and beyond, largely hinged on benefits accruing from its convergence with Safaricom on Mkesho. We view M-Kesho as the transformative face of mobile banking in Kenya,” said the report.
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