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M-Pesa partnership pays big for banks, says agency

Among the products that banks have come up with after the partnerships with money transfer platforms include KCB
Among the products that banks have come up with after the partnerships with money transfer platforms include KCB M-Pesa and Commercial Bank of Africa’s M-Shwari. FILE PHOTO | NMG 

Kenyan banks’ partnerships with Safaricom #ticker:SCOM M-Pesa to offer savings and loans products has a positive impact on the creditworthiness of the institutions, rating agency Moody’s has said.

The links between the financial firms and the telecoms has led to fintech innovation that is expected to continue to expand the market for banking services, the agency said.

Among the products that banks have come up with after the partnerships with money transfer platforms include KCB M-Pesa and Commercial Bank of Africa’s M-Shwari.

“Kenyan banks are now working with Safaricom's M-Pesa mobile payments service to offer saving and loan products, a credit positive,” said Moody's Investors Service.

The banks have as a result of their working with Safaricom increased their loans and deposits using a larger customer base while the telco has seen its revenue rise significantly.

In the six months to September 30 last year, the telco had raised its revenue from M-Pesa alone to Sh35.52 billion, an upward change of 18.2 per cent compared to the same period the previous year.

KCB, for example, said last December that its customer base had risen to 14 million from four million since the March 2015 launch of KCB M-Pesa platform in partnership with the telco.

"Banks have piggybacked on a successful model, partnering with M-Pesa to offer services, like loans and deposits, and improving their cost efficiency," said Christos Theofilou, VP-Senior Analyst at Moody's.

"M-Pesa is a fintech disruptor and has dominated payments in Kenya since 2007. Mobile payments adoption has broadened financial inclusion and expanded the banking population, increasing banks' customer base and revenue pool, and strengthening demand for banking products," he added.

Moody’s also said that early innovation by domestic banks and Kenya's regulatory caps on lending rates created barriers for global players aspiring to break into Kenya's lending market. “Large banks already offer most of their loans through mobile platforms, using advanced analytics to assess credit risk. As technology develops, the largest and most innovative banks stand to gain further, but must fight to retain a direct relationship with customers,” said Moody’s.

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