NCBA eyes deals for M-Shwari entry into DRC, Ethiopia

NCBA Bank managing director John Gachora. PHOTO | NMG

NCBA Group is set to launch its mobile phone banking services M-Shwari in Ghana, Ethiopia and the Democratic Republic of Congo (DRC) through partnerships in efforts to grow further into a regional bank.

The group, which also operates in Tanzania, Uganda and Rwanda, is in talks for partnerships with banks and telecoms operators in the three countries for mobile phone banking services.

This signals that the Kenyan bank will seek to earn commissions from the deals over setting up brick-and-mortar operations in Ghana, Ethiopia and DRC.

Kenyan commercial banks are looking beyond their borders for acquisitions and partnerships, seeking to tap opportunities outside East Africa, which are driven by rapid economic growth and trade integration.

NCBA has reaped huge rewards from pioneering mobile phone-based lending in Kenya after teaming up with telecoms operator Safaricom in 2012 to launch the dominant service, M-Shwari.

It wants to replicate this model outside East Africa, in particular virgin markets of Ethiopia and DRC—which have huge populations and a banking sector mainly focused on serving big companies, making them appealing to ambitious lenders in regional states in search of retail lenders and small traders for growth.

"In new markets the model will be to work with local banking and mobile partners to deliver our products,” NCBA Group chief executive John Gachora said in an interview.

“The countries of interest for now remain Ghana, Ethiopia and DRC - these added to our current five would make it eight countries."

He did not disclose the banks and telcos that NCBA is seeking in the three markets. Telecoms operators have expanded mobile financial services across Africa after the idea was pioneered by Safaricom with its M-Pesa service in 2007.

Kenyan lenders have been turning to technology in response to the competition from mobile phone-based financial services.

NCBA has partnerships in the regions with other telecoms operators, including M-Pawa in Tanzania with Vodacom, Mokash in Uganda and Momokash (Ivory Coast) with MTN.

The bank says the partnerships will be a key plank in expansion of its digital lending business in the continent.

“As NCBA, we are looking to start seeing digital financial services as an export product beyond Kenya and into the region,” NCBA director of digital business Erick Muriuki said.

“The objective here, of course, is to ensure that we can diversify our revenues from beyond Kenya and be able to see that we are generating significantly more revenues from the digital business outside East Africa.”

Ethiopia’s State-owned mobile operator, Ethio Telecom, last May launched the mobile phone-based financial service, Telebirr.

It allows users to send and receive money, deposit or take out cash at appointed agents, pay bills to various merchants and receive cash sent from abroad. Safaricom was last month given the nod to launch M-Pesa in Ethiopia, the first time foreigners were allowed to offer the service and smooth the market for NCBA.

Ethiopia’s banking sector is still one of the most tightly state-controlled in Africa and is not open to foreign ownership.

The sector is dominated by the two oldest and most profitable institutions, Awash Bank and Dashen out of the 19 commercial banks that Safaricom and NCBA must seek deals with to launch Ethiopia’s first mobile phone lending product.

DRC became the seventh member of the EAC this year, bringing the size of the bloc’s economy to over Sh30 trillion. The nation of about 90 million people is the world’s biggest cobalt producer and Africa’s top copper miner—whose retail banking and fintech market is tiny, and yet to go big on lending through mobile phones.

NCBA will have to do battle with Equity and KCB, which have entered or are seeking to enter the central African country through buyouts.

KCB in August entered an agreement to acquire 85 percent stake of DRC’s Trust Merchant Bank (TMB) while Equity bought Banqué Commerciale du Congo in 2020.

NCBA will spin out its financial technology (fintech) business, which includes M-Shwari, into a standalone company in the race to create more personalised and feature-rich digital banking services for its customers.

This comes in a period when banks are increasingly turning to imaginative combinations of software, hardware and data to create and deliver both new and traditional financial products and services.

It is part of a global trend that has seen financial giants like Goldman Sachs and JP Morgan Chase invest in fintech for asset and wealth management, card business as well as offer savings accounts and personal loans to retail customers.

The NCBA revelation comes weeks after the Central Bank of Kenya (CBK) started regulating digital lenders, a move that will give the banking regulator powers to rein in lenders who violate consumer privacy and overcharge consumers.

Borrowings on Fuliza via NCBA rose by 30.7 percent to Sh288 billion in the six months to June from Sh288 billion in the same period a year earlier.

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