Safaricom says it inked a deal with Commercial Bank of Africa (CBA) to operate the recently launched saving and lending service eight days before signing an agreement with Faulu Kenya, which has accused the mobile service provider of copying its idea.
(Read: Safaricom hits back at Faulu over M-Shwari ownership)
Documents filed in court by Safaricom Tuesday showed that the mobile operator signed the agreement with Faulu Kenya on April 12 for a savings and lending service and with CBA on April 4 for a similar product.
Faulu Kenya, a deposit-taking microfinance company, last week filed a case in court where it wants Safaricom stopped from using M-Shwari service on alleged copyright infringement and breach of agreement.
M-Shwari is a value addition service on the Safaricom’s money transfer service, M-Pesa, allowing users to save and borrow money (from Sh100 to Sh20, 000) from CBA.
However, Faulu claims that it was the author of M-Shwari idea, which it has now implemented with Airtel Kenya as Kopa Chapaa mobile loan services.
Safaricom has denied stealing the concept from Faulu and reckons that the service of accessing credit through the mobile phone is not new, citing products unveiled by KCB Group, Family Bank and Equity Bank that run on M-Pesa platform.
“I do not therefore accept that the plaintiff (Faulu) developed a novel cash advance system prior to the defendant’s (Safaricom) own systems or that the plaintiff had intellectual property in a product similar to the defendant’s M-Shwari service,” said the mobile phone company in court documents.
Safaricom has also objected to dispute being heard in the High Court and instead wants it handled by Industrial Property Tribunal—a matter Justice Jonathan Havelock will rule on Thursday on.
Faulu Kenya claims that it developed a cash advance service in 2011. The service would be operated on the mobile telephony platform and customers would be able to apply for, receive and make payments through a mobile telephone network.
It states that it is already using the product in partnership with Airtel under the brand name Kopa Chapaa cash advance services, which it says has already been approved by the Central Bank of Kenya.
The company also alleges that it had proposed to Safaricom to enter into a partnership with it to offer the service through M-Pesa and presented to it a concept paper with details of the proposed service.
The two firms also signed a non-disclosure agreement that restrained either party from disclosing information on the proposed service to a third party or using the information to gain competitive advantage over the other, according to Faulu Kenya’s suit.
The micro-finance company accuses Safaricom of breaching the non-disclosure agreement and contravening its trade secrets and copyright by offering M-Shwari. It claims that Safaricom only made minor modifications to the concept shared with it and launched it as M-Shwari.
But Safaricom acknowledges it has inked the non-disclosure agreement with Faulu, but says the pact only covered details known to both parties on April 12.
The mobile phone operator reckons it had knowledge of a similar product, having signed a pact with CBA eight days before the Faulu agreement.
“The aforementioned Non-Disclosure Agreement states categorically that proprietary information shall not include information that is known to the receiving party’s prior to the disclosing party’s disclosure of the same, is already public knowledge and is independently developed by the receiving party,” said Safaricom in its affidavit.
The mobile phone firm added that the technology that M-Shwari sits on is based on the Mobile Account Management, which it argues was developed by UK firm Vodafone that owns 40 per cent of Safaricom.
M-Shwari allows subscribers to make savings of between Sh1 and Sh100,000, the maximum deposit on M-Pesa, earning an interest of between two and five per cent while borrowers initially qualify for loans ranging between Sh100 and Sh20,000.
The loans, payable within 30 days, attract an interest or facilitation fee of 7.5 per cent.
Faulu’s Kopa Chapaa allows for between Sh500 and Sh10,000 loan repayable within 10 days at an interest rate dependent on the amount borrowed.
According to the court documents, M-Shwari so far has 640,000 customers registered with approximately Sh50 million disbursed in loans and three times that amount collected as deposits as of Tuesday.
“I verily believe that if an injunction were granted those 640,000 customers would be adversely affected and CBA would suffer loss of approximately Sh50 million in depositors’ fund that it has put up in loans,” Safaricom said in court documents.
Faulu now wants the court to issue a temporary injunction stopping the mobile telephone firm from offering the service.