Time flies with great content! Renew in to keep enjoying all our premium content.
Prime
KCB signs deal to lend M-pesa agents money
Mr Oduor-Otieno (left) and Safaricom CEO Bob Collymore. The deal is a move to squeeze more earnings from M-pesa. Photo/NORAH BOCHERE
Kenya Commercial Bank (KCB) is seeking to grow its loan book by lending to Safaricom’s M-pesa agents whose operations have been hampered by lack of working capital.
On Thursday, the bank signed a deal with Safaricom that will see it lend to M-pesa agents up to 80 per cent of their commission earnings, with a ceiling of Sh2 million.
The high uptake of Safaricom’s M-pesa service has resulted in regular shortage of float among agents, with the telecom turning the heat on agents who can’t beef up their working capital, a move that is set to drive up demand for the KCB loans.
Float is the amount of money kept with an appointed bank to facilitate cash transactions of similar value.
New clients
KCB is banking on the deal to tap new clients and grow its loan book after raising Sh12.5 billion in new capital last year.
“We expect to acquire more clients and grow our lending through this deal,” said Martin Oduor-Otieno, the KCB chief executive.
The bank’s loan to deposit ratio stood at 68 per cent in September 2010 compared to 76 per cent a year before, meaning that the lender’s customer deposits are growing faster than its loan book.
The bank is targeting the 23,000 M-pesa agents who could earn it outsized returns based on the high lending rate wrapped in the deal.
Voice revenues
The loans will attract an interest rate of 18 per cent per year, plus a setup cost of two per cent.
Those applying for the loans will also be required to open an account with KCB and pay a daily fee of Sh30 to maintain it, a move that could boost the bank’s transactional income.
The bank is one of the most diversified lenders in terms of customer base and it is aggressively pushing its loan offering among low income groups, rolling out loans from Sh5,000, reflecting the growing importance of the mass market in the competitive banking sector.
For Safaricom, the deal is a move to squeeze more earnings from M-pesa as part of an overall strategy to cushion its earnings from the dwindling voice revenues.
