Markets & Finance

Safaricom targets diaspora cash in deal with UK firm


An M-Pesa agent serves a client in Nairobi. Safaricom’s deal with Skrill enables sending of cash from abroad directly into an M-Pesa account. FILE

Safaricom is set to sign a partnership deal with a UK-based online payments and cash remittances company that could see it earn lucrative commissions from the multi-billion shilling remittances sent home every year by Kenyans in the diaspora.

The deal enables sending of cash from abroad directly into an M-Pesa account, a feat that Safaricom has targeted to achieve for years but has been delayed by concerns over stringent international regulations against money laundering and financing of terrorism.

The UK company, Skrill, has capacity to handle online payments and cash remittances in 41 currencies while also supporting credit and debit card transactions.

“All you need to send money is the receiver’s full name and an M-Pesa mobile phone number. The money is then instantly deposited directly into their activated mobile wallet and they receive an SMS,” says the UK firm on its webpage, which also features the M-Pesa logo.

Skrill rebranded late last year from its former trade name Moneybookers, a platform commonly used by Kenyans to receive online payments by companies abroad to do various jobs such as research work, graphic design and transcribing.

Safaricom director for corporate affairs Nzioka Waita said the firm had not yet signed a final partnership deal with Skrill, an indication that the deal could still be under the negotiation and testing stages.

“We have not ruled out working with them in the near future,” said Mr Waita.

Diaspora remittances last year rose by 10.2 per cent to Sh111 billion ($1.3 billion), attracting the interest of money transfer companies targeting transaction fees from the transfers.

READ: Kenya diaspora inflows hit record high in 2013

Remittances from Kenyans working abroad are the fourth-largest source of foreign exchange after revenue from tea, horticulture and tourism.

The United States and Europe, where Skrill has a strong presence, are the main source of cash sent home by Kenyans in the diaspora. Last year more than 75 per cent of total remittances originated from North America and Europe.

The UK firm charges a remittance fee of one per cent of the money being sent with a cap at Sh1,160 (10 Euros). The platform is also used for online shopping.

“At Skrill we are committed to keeping our fees permanently low and totally transparent.

‘‘Paying at a shop or transferring funds with any merchant is free, receiving money is free, uploading funds into your Skrill account is usually free, but some options involve a small charge,” says the firm. London-based private equity firm CVC Capital Partners bought out Skrill for Sh69.9 billion (600 million Euros) last year.

The Central Bank of Kenya has attributed the sharp rise in diaspora remittances to competition between the remitting companies and better capture of data due to increased use of formal channels.

Previously those who received money through Skrill had to wait for up to four days before they could withdraw the cash from their banks.

The payments were received in dollars, with local banks converting at prevailing rates. Skrill said it charges a four per cent foreign exchange rate if one is sending US and Canadian dollars, the pound, Euro or Polish Zloty but five per cent for other currencies.

Growing influence

M-Pesa is currently also used by those in Britain to send money back home. Western Union also partnered with Safaricom in 2011 allowing people in 45 countries to send money directly to M-Pesa accounts, underlining the growing influence of the mobile money platform.

Online transactions have been rising in the Kenyan market with most users buying computer software, electronics, cosmetics, clothes and books. Mobile money has been more popular in Kenya at the expense of card usage.

Kenya recently passed the anti-money laundering law allaying fears of reputational risks that international payment companies had while dealing with Kenyans.

The Ministry of Foreign Affairs has also forwarded a policy paper on Kenyans living in the diaspora for cabinet approval which seeks to put in place guidelines to lower cost of remitting money and deepen the use of official channels.

African nations have also realized the contributions of their citizens living abroad and recently opened a remittances advisory unit in Nairobi to encourage emigrants to send money back home.