M-Kesho growth stalls over hitch on profit sharing
M-Kesho is a mobile phone banking and savings platform that enables Equity Bank customers to save or withdraw money and also borrow small loans from their mobile phones. Photo/FILE
Difficulty in negotiating profit sharing plans between Equity Bank and Safaricom has stalled the growth of M-Kesho, a World Bank report has said.
M-Kesho is a mobile phone banking and savings platform that enables Equity Bank customers to save or withdraw money and also borrow small loans from their mobile phones.
To operate M-Kesho, Equity Bank and Safaricom needed to integrate their operating systems and agree on a profit sharing plan, but the World Bank says lack of a clear agreement between the two firms has hindered growth of the product.
“Although released to much fanfare, M-Kesho has not been widely promoted subsequently, which may reflect difficulties Equity Bank and Safaricom have had in managing the partnership,” says the report released earlier this month.
Data from the Central Bank of Kenya (CBK) dated February shows that M-Kesho has 799,532 accounts with 240,633 customers having already transacted. In six months after its launch in May 2010, the product had 613,000 subscribers, indicating a declined rate of uptake.
The report notes the fact that Equity and Safaricom have to make profits on M-Kesho reduces the profit margins, explaining why M-Kesho pays low interest rates on deposits.
The report also says the two firms have difficulties reaching a working agreement for the product.
Both Equity Bank and Safaricom declined to respond to our queries regarding the World Bank report.
Other mobile money services offered by banks in partnership with mobile service providers require customers to have an existing bank account making it a partial integration, unlike M-Kesho that envisaged Safaricom agents opening accounts for new users.
Bargaining power
New M-Kesho customers initiate opening of an account at M-Pesa agencies, which Equity Bank activates within 48 hours. Partially integrated mobile banking services include Pesa Pap by Family Bank, KCB Connect, the NIC mobile bank platform and Orange Money, between Equity and Telkom Kenya.
The World Bank research notes that partially integrated mobile banking systems are easier to manage as the bank compensates the mobile service provider for access to the network and takes its share of profits, while a full integration poses a difficulties in distribution of the surplus — depending on the relative bargaining power of the contract between the parties.
Orange Money, a collaboration between Equity Bank and Telkom Orange that requires customers to have bank accounts, has 150,000 registered customers.
The Telkom Kenya CEO, Mr Mickael Ghossein, told the Business Daily that the two companies “do not have challenges in managing their relationship”.
“We act as the hand of the bank to reach people without them going to branch. We share revenues depending on the type of transactions.
If you transfer from account to mobile it’s shared, if you do an ATM transaction it’s not shared, if you make transfers it’s shared,” said Mr Ghossein.
