KCB targets loan book growth from M-Pesa agents deal

What you need to know:

Agents of Safaricom’s mobile money transfer service M-Pesa will have access to the credit facility, helping them to solve the perennial float shortage problem that limits their daily transactions.
M-Pesa agents will be allowed to borrow one-year loans at any of the bank’s branches. Agents can borrow between Sh50,000 and Sh5 million.
KCB said that the deal would allow it access a potential pool of small and medium-size enterprises (SMEs) which it sees in the 60,000 agents spread across the country.

KCB has set aside a Sh1.5 billion war chest targeting M-Pesa agents with unsecured loans in a deal set to boost the lender’s loan book.

Safaricom is also expected to benefit from an increase in revenues due to higher frequency of customer transactions.

Agents of Safaricom’s mobile money transfer service M-Pesa will have access to the credit facility, helping them to solve the perennial float shortage problem that limits their daily transactions.

Safaricom and KCB Tuesday announced the agreement which will allow M-Pesa agents to borrow one-year loans at any of the bank’s branches.

Safaricom chief executive Bob Collymore said the loan is expected to reduce the number of times M-Pesa users are unable to deposit or withdraw money due to lack of sufficient float by agents.

“Through this partnership, I believe we now have an effective solution to the challenges around float shortages”, said Mr Collymore in a statement.

Revenues

Safaricom’s estimated 60,000 agents can borrow up to six times the average commissions earned over a six-month period at a 20 per cent per annum interest rate. Agents can borrow between Sh50,000 and Sh5 million.

Analysts said that increasing float will result in more M-Pesa transactions, which should translate into more revenues for the telecommunications firm.

“For Safaricom, this business continuity and liquidity should increase revenues since it will increase turnaround times and efficiency through lower instances of unavailable funds,” said NIC Securities business development manager Samuel Gichohi.

Safaricom’s revenues from M-Pesa stood at Sh10.43 billion for the first six months of the current financial year and accounted for 18 per cent of the Sh59.12 billion in revenues that the telecom made. The company's year runs from April to March.

Voice revenues stood at Sh37.42 billion (63 per cent), data Sh3.98 billion (6.7 per cent), messages Sh4.27 billion (7.2 per cent), handset revenues Sh2.43 billion (4.11 per cent), while acquisition and other revenues stood at Sh0.59 billion (one per cent).

The Sh10.43 billion in M-Pesa revenue was a 32.3 per cent increase from Sh7.88 billion earned over a similar period in 2012. At the time users stood at 15.23 million.

Credibility

Credit being the lifeline of the agency business means that agents can prevent loss of credibility, increase client satisfaction, and ensure business continuity all of which should see agents get more earnings, added Mr Gichohi.

KCB said that the deal would allow it access a potential pool of small and medium-size enterprises (SMEs) which it sees in the 60,000 agents spread across the country.

“The foundation of KCB’s business is built upon the entrepreneurial spirit of SME business owners throughout East Africa,” said KCB chief executive Joshua Oigara.