Category Archives: M-Pesa

Safaricom Exceeds Earnings Expectations, Powered by M-Pesa and Data

At their Nairobi headquarters today, Kenya communications company, Safaricom announced another record year with the release of the Safaricom 2017 results, which CEO Bob Collymore credited to a focus on customers, innovative products and improving operations.

The company reported revenue of Kshs 204 billion (~$2 billion), an increase of 15% from the year before, and an astounding EBITDA of Kshs 103 billion ($1 billion), up from 83 billion in 2016. M-Pesa growth was 33% to Kshs 55 billion as the number of active M-Pesa customers increased to 19 million – who do an average of 10 transactions a month. The number of customers also went up 12% to 28.1 million.

Later, their CFO said the results came even as customers enjoyed lower costs of voice calls, SMS and money payments. Under “M-Pesa” Kadogo, the company waived M-Pesa tariffs for payments below Kshs 100 ($1) in a push to drive financial inclusion and this led to an 88% growth in transactions in that band.

Chairman Nicholas Nganga said that “Sustaining this growth is key to the Board” as he announced that the contract of Bob Collymore had been extended for an additional two years. Collymore, in turn, said that at a time when several Kenyan companies were announcing job losses, Safaricom had added 500 new jobs during the year and would be adding another 270 mainly in customer care.

Going forward, Safaricom will be changing their earning outlook from projecting EBITDA to projecting EBIT (earnings before interest & taxes) – and for 2018 they project EBIT to be between Kshs 71 to 75 billion after capital expenditure of between Kshs 35 and 38 billion that will be spent in 2017/18.

Following the release of the Safaricom 2017 results, their shareholders will get a dividend of Kshs 0.97 per share, equal to 80% of the profit, is an increase of 27% from 2016 – excluding the one-time bonus dividend paid out last year. The payment will total Kshs 38.8 billion, and 35% of that goes to the Kenya government as the second largest shareholder after Vodafone.

Kenya Fintech Tools for Youth

A rundown of local fintech tools for phones available in Kenya, both from banks and non-banks. Most don’t give you much access to all their features till you register and It’s not clear where the user data for some of them ends up. They are mostly there for android phones, less so for iPhones. Take a spin, and share feedback if you have used them.

Non Bank One’s

Abacus helps novice or pro traders, understand and trade at the Nairobi Securities Exchange.

From CIC Group comes Bima Credo with which people can get life insurance by buying and using airtime credit. This enables consumers to pay for their life insurance premiums in affordable amounts and as part of their daily mobile airtime usage.

Mula: (Android only) is a bill payment service from Cellulant. One can pay all bills in one place, and track past payments, pay for Nairobi City parking and buy items for friends on any network. You will never forget a (recurring) bill, as Mula is fully integrated with Safaricom’s M-Pesa API so this means no copying and pasting transaction details. All you have to do is accept or decline the transaction. Another review by Moses.

M-Shwari Take part in the #52WeekChallenge With M-Shwari that locks savings and one will be able to save Kshs 68,500 ($685) a year, a handy sum, just by small periodic installments.

Open World has Open Business, a point of sale app for small businesses. They can use it to track sales and inventory in real-time. No long-term contract is required, just Kshs 500 (~$5). The app is a bottom-up fintech tool for SMEs that will enable data based lending from banks and alternative lenders.

The Safaricom App now comes with M-PESA functions and can be downloaded to Android and iOS smartphones.  The app enables customers to select contacts from their phone when sending money and customers. Aside from that, merchants will also enjoy faster payments through Lipa Na M-PESA to their accounts at 23 banks ..this will cut down the time that it takes to move money from a Lipa Na M-PESA till to a bank account from as much as 28 hours down to seconds.

Uhasibu has payroll which simplifies payroll management, including statutory payments to a half-dozen government agencies that businesses have to make every month, and these include different taxes. Another review by  Moses.

Zeep (Android): Enables teens to learn finance in a secure environment. Their parent/guardians register (*823#) then also link and register to their children/ beneficiaries/ dependents numbers. They can use the app to make payments for NHIF, land rates and business permits. They can also allocate weekly amounts to teens and watch as they pay for utilities and other bills.

Bank One’s

CBA has Loop which is geared toward the young hustler or someone who needs banking for a side gig. Tagged as unbank yourself, users, once they register and get a debit card, can pay bills and categorize items to spend on and track these against set budgets e.g. see how much they spend on food & dining., transport ( Uber) , or rent. The can also check balances, and see a financial snapshot at any time. Another review by Macharia.

Equity has Eazzy banking platform from Finserve. One can store billing details to pay after and also send money securely to another phone or bank account, pay for goods and services, buy airtime for EquiTel and other networks. One can also set and save for a goal, send money to favorite people (contacts on whatsapp, twitter, facebook) and apply for loans instantly of up to Kshs 3 Million (~or $30,000)  and track NSE shares.

Stanbic has a Kidz banking app (available in South Africa) – an educational and fun app that teaches children how to save and manage their pocket money. Kids earn money when they complete their chores and can save towards goals while parents get to approve payments, set and monitor tasks, etc.

Other banks like Coop and KCB have accounts tailored for children and young adults with extras such as book & uniform discounts and education & insurance policies, but it would be nice if they added financial education tools and apps dedicated to those bank accounts.

Vodacom IPO launched in Tanzania: a Prospectus Peek

Quick note excerpts from the 140-page Vodacom IPO prospectus. There’s even a Swahili version  (PDF) of this Vodacom Tanzania PLC prospectus.

About Vodacom

  • Vodacom Tanzania PLC is a subsidiary of Vodacom Group (South Africa), which in turn is a subsidiary of Vodafone Group Plc (UK). Vodacom Group Limited is the beneficial owner of 82.15% of Vodacom Tanzania. Mirambo Limited directly holds the remaining 17.85%.
  • Vodacom is Tanzania’s leading mobile operator. Market share: Vodacom Tanzania (31% ), Tigo (29%), Airtel (26%), Halotel (7%), Zantel (4%), Smart Telecom (2%), TTCL (1%)
  • In 2016 Vodacom had 12.38 million customers (including 5.4 million active data customers) and an ARPU of TZS 5,972. Vodacom Tanzania has 570 employees, 189 nationwide retail points, in excess of 17,000 freelance distributors and 75,000 mobile money agents.
    Vodacom is part of a “consortium” (with Tigo, Airtel, Zantel) that has constructed about 400 km of metro fibre, in Dar es Salaam, Dodoma, Morogoro, Mwanza and Arusha, as well as over 1,300 km of backbone fibre linking the major cities of Dar es Salaam, Dodoma, Arusha and Moshi.
  • Vodacom Tanzania estimates that the total net proceeds from the Vodacom IPO issue of 560 million new shares, after deducting expenses (and assuming that the offer is fully subscribed), will be TZS 469 billion (~$210 million)

Use of proceeds:

  • Vodacom Tanzania intends to apply such net proceeds to:
    (i) The execution of inorganic growth opportunities geared towards growing and maintaining Vodacom Tanzania’s leading market position (elsewhere the prospectus mentions that Vodacom Tanzania may consider mergers, acquisitions or strategic investments),
    (ii) Working capital augmentation for Vodacom Tanzania; and
    (iii) general corporate purposes for Vodacom Tanzania (elsewhere it mentions that part of the Vodacom IPO proceeds will be used to repay loans from the Vodacom Group and Mirambo).

Risks & Regulation

  • (this is a) Forced listing & IPO: The Company converted from a private limited company to a public limited company in November 2016. Following the 2016 Finance Act, all licensed telecommunication operators are to have a minimum local shareholding of 25% of their authorized share capital issued to the public and listed on the Dar es Salaam Stock Exchange (DSE).. penalties may be imposed by TCRA should the IPO not take place within six months from 1 July 2016.

Non-compliance:

  • The Bank of Tanzania allowed Vodacom Tanzania to continue offering Mobile Money Services whilst the license applications are pending (it has applied for Payment System License and will apply for an Electronic Money Issuer License)
  • Vodacom Tanzania is also working on forming a separate M-Pesa corporate entity to comply with regulations.
  • Vodacom Tanzania is working on a project plan to migrate all its Network Operating Centre (NOC) operations to Tanzania to comply with an in-country NOC requirement.
  • Vodacom Tanzania is also working on network optimisation and modernisation initiatives to ensure compliance with Quality of service (QOS) obligations.

Government Moves

  •  Issuance of new licenses: presents a risk to the profitability of the company. The awarding of a new license to a new operator last year saw the advent of an eighth licensee to an already intensively competitive market. 99% of Vodacom Tanzania’s customers are prepaid (But) It is unlikely that there will be a new entrant into the Tanzania telecommunication market. Any new player in the Tanzania market should not pose a significant competitive challenge in the period to 31 March 2018 because of market penetration and lead time to setting up a telecommunication network.
  • Spectrum: Vodacom Tanzania is on record that it requires additional spectrum to meet quality of service requirements (QOS), especially for data services. The decisions taken by the Government on the timing, fees, and allocation of digital dividend and other spectrum will have a major impact on Vodacom Tanzania’s ability to serve its customers,
  • Tax Risks:  “The complex tax environment in Tanzania poses a number of challenges to Vodacom Tanzania.”  Two new taxes going up may affect Vodacom Tanzania’s profitability: Draft amendments to the UCSAF Regulations seek to increase the service levy from 0.3% of service revenue to 1% of service revenue while a draft revision of the Local Government Finances Act (LGFA) proposes an increase in the rate of service levy charged from the current 0.3% to 1.5% of turnover net of value added tax and excise duty for all businesses. The LGFA further proposes to empower local government authorities to impose levies on telecommunication transmission towers.
  • Vodacom Tanzania already has a number of tax matters and litigations that are pending at various appellate levels. Tax litigation with the Tanzania authorities over TZS 100 billion  (~$51m) calculated on issues like undersea fibre, towers, foreign exchange, losses, withholding taxes, VAT, roaming, interconnection licenses capital allowance). There’s also a potential $500 million from a tort conspiracy case over frequency allocation and a half dozen other staff cases.

Performance:

  • Vodacom Tanzania’s audited annual Accounts for the years ended 2014 and 2015 showed a profit before tax was TZS 166 billion in 2014, TZS 78 billion in 2015 (from revenue of TZS 908 billion). For 2016 it was 74 billion in 2016 (from revenue of TZS 923 billion)
  • They project a project a pre-tax profit of TZS 82 billion for March 2017 and  TZS 137 billion for March 2018

Strategies

  • Continue to grow M-Pesa There has been the phenomenal success story of mobile financial services in Tanzania, where Vodacom Tanzania remains the market leader in terms of customer share and has significant brand equity…Vodacom M-Pesa makes up in excess of 20% of Vodacom Tanzania’s service revenues
  • Benefit from Vodafone: Vodacom Tanzania will, however, remain part of the Vodafone Group and will continue to benefit from their scale of operations and expertise.
  • Vodacom Tanzania may consider mergers, acquisitions or strategic investments.

Other Companies

  • In 2016, the Group acquired 100% of Shared Networks Tanzania (SNT) from its shareholders for $15 million
  • The group remains committed to its decision to exit its investment in Helios Towers Tanzania (HTT ), an associate in which the group holds a direct investment of 23.78%. In September 2013, Vodacom Tanzania PLC decided to sell and lease back its passive equipment to HTT.

Vodacom IPO Expenses

Issue expenses are estimated at TZS 7.1 billion (about $3.9 million) and include amounts for the lead advisor and sponsoring broker’s fees (Orbit Securities) TZS 650M, lead receiving bank fees (National Bank of Commerce) TZS 872M, Capital Markets & Securities Authority fees TZS 283M, Dar es Salaam Stock Exchange listing fee of TZS 1 billion, and all authorised collecting agents will share TZS 3.8 billion.

For Investors

  • 560 million new shares (or 25%) are being sold, and all the shares will be listed on the DSE. Vodacom IPO shares will only be sold to Tanzanian citizens and entities incorporated in Tanzania in which Tanzanian citizens have a majority beneficial ownership (no shares for East Africans unlike previous IPO’s in the region)
  • The minimum investment is TZS 85,000, equal to about $38 or KES 3,926. This is for 100 shares at TZS 850, and after that buy in multiple of  10 shares.
  • Buy via phone: Using their phones, Tanzanians can apply for shares through the DSE platform (dialling *150*36#) and also pay for shares via M-Pesa (by dialling *150*00# and entering the business number 236622, and a unique DSE reference number)
  • After the IPO. the public will own 25% alongside (Vodacom and Mirambo), and the dividend policy is to pay out at least 50% of earnings after tax but at the discretion of the board of directors. (31 March 2016 EPS was 34.65 TZS and the group expects to pay dividends of TZS 16.5 billion in FY17.
  • Timetable: The Vodacom IPO opened on 9th March, and closes on 19th April. The results will be announced on April 28, the listing will be on 16 May, and an AGM is scheduled for 1st June 2017.

Will the Vodacom IPO be as successful as the Safaricom IPO was in Kenya a decade ago?  The Vodacom IPO certainly seems to be selling well, attracting lots of first time Tanzania investors, in the first two days.
100 USD equals 223,000 TZS and 100 KES = TZS 2,165.

EDIT August 9 – Official results: Vodacom Tanzania is delighted to announce that the IPO has raised TZS 476,000,085,000 as planned. Of this amount, 60% of the Offer was raised through subscriptions by Tanzania investors and 40% of the Offer from international investors. This is a significant landmark transaction for the country, being the largest IPO in the history of Tanzania’s capital markets and has attracted more than 40,000 Tanzanian investors, most of whom are first time participants in the capital markets in Tanzania.

EDIT Vodacom Tanzania shares started trading on August 15. Shares in Vodacom Tanzania Plc, part of South Africa’s Vodacom Group, rose nearly 6 percent above their issue price in their debut on the Dar es Salaam Stock Exchange on Tuesday.  Vodacom placed 560 million shares at 850 shillings each in Tanzania’s biggest initial public offering (IPO), raising 476 billion Tanzanian shillings ($213 million).

Pesalink & The Wajanjas

The Wajanjas is the name given to the pre-launch activities of Pesalink which was unveiled three weeks ago. Pesalink is an initiative of the Kenya Bankers Association that may be the next revolutionary thing in Kenyan banking. Already 20 commercial banks have activated it.

While it may appear to be a reaction to mobile money, and m-pesa, Pesalink is actually a reaction to the banks’ own customer habits and the prevalence of the mobile phone – and recent bank internal numbers show customers moving from branches to phones. According to Barclays Bank, its customers did 43% of their transactions at their branches in 2016 down from 59%. At KCB, 75% of customers use mobile phone banking services and 91% of loans transactions are processed on phone, while at Coop, just 25% of transactions were done at branches at branches in 2015.

One of the main bank activities now is customers performing real-time cash transfers and payments. This is done by customers going to ATM’s or getting cash which they then upload to mobile money to be sent to a recipient, who then withdraws cash at an agent, and probably re-deposits it into a bank. But all that changes with Pesalink which short-circuits the long chain as transfers can be initiated at by phone (USSD / bank app), at a bank branch/agent, or bank ATM or over the (bank) Internet – and sent to any recipient registered at any of the 20 banks. This will also lower the costs of transacting. For the consumer, it currently costs a lot of money to send money, and Equity Bank CEO, James Mwangi,  said Kenyans spent 59 billion to transfer money last year, but that figure should come down with Pesalink.

In addition, the mobile money limits of Kshs 70,000 per transaction and Kshs 140,000 (~$1,400) per day don’t apply here. Pesalink limits are similar to that of bank cheques – which can go up to Kshs 1 million shillings (~$10,000). This is very useful when there are events like fundraisers, weddings, and (unfortunately) funerals. These are often expensive affairs where as soon as funds are raised they have to be disbursed quickly to service providers.

Another useful feature, that’s finally here, and which mobile money has failed to incorporate, is adding in the reason for a transaction. You can tag each payment with a useful message as to what it is for “bride car hire” or “apartment F6 water repair” and this helps account holders to track their mobile money transfers over time.

Try out Pesalink at your bank, by designating your phone number, and your primary bank account number. NIC Bank has some nice menus (PDF) that explain how simple it is to use Pesalink.

Fintech Moment in East Africa: AmEx FT Pesalink Bitcoin

Recent events in the fintech (financial technology) payment space in East Africa.

Banks

  • The Kenya Bankers Association (KBA) unveiled Pesalink, a digital payments platform that is expected to cut the cost of transactions and transform the way consumers interact with their banks. Pesalink is a fully owned subsidiary of KBA and it will enable customers to make payments between banks in real-time, around the clock, without having to go through intermediaries. It has been approved at Standard Chartered, Co-Operative, Barclays, Commercial Bank of Africa, I&M, Diamond Trust, Gulf African, Guardian, Victoria, Credit, Prime and Middle East banks…“RT @alykhansatchu: .@HabilOlaka says @KenyaBankers will be targeting payments that exceed M-Pesa’s maximum transaction of ($675)”
  • Cooperative Bank: Is a demonstration that the how banks ar moving in the technology space. Kenya’s 3rd bank has adapted to their customers embrace and they enable more customers to use alternative channels for transactions.  They had a valentines’ week promotion to highlight and encourage customers to use alternative channels such as MCo-op Cash (get a loan straight from ones’ phone  at 1.16%  per month and send money to other MCo-op users for free) or at a Co-op Kwa Jirani agent (deposit cash into someone’s Co-op Account for FREE at a Co-op Kwa Jirani agent) or Co-Op cards.
  • KCB will unveil it’s fintech future – a strategy based on a digital finance  in Q2 of 2017
  • Another is EcoBank which launched a new mobile app which integrates Masterpass QR, a mobile payment solution from MasterCard.  It enables customers to send and receive money instantly across 32 other African countries.

Government

  • National Bank has launched cashlite payment solutions suite for county governments, Ministries, Government Agencies, and Departments. The bank has provided a variety of options for payments including mobile money, smart cards, and e-wallet and cash options, aligned with the continuing growth of mobile technology as well as consumers’ expectations for convenient mobile and online payments.
  • Strathmore University has supplied Busia county government with a revenue collection systems called CountyPro® with which the government hopes to grow revenue by 300%. It caters for all the unstructured county revenue sources including parking, market cess and trailer parking.
  • Mastercard is the technology partner for the Huduma Card in Kenya enabling payments for government services.  It is being issued by Commercial Bank of Africa, Diamond Trust, Equity, and Kenya Commercial banks. Kenyans will be able to pay for an array of enrolled Government services such as the National Hospital Insurance Fund (NHIF), National Social Security Fund (NSSF) amongst others. 

Cards

  • mVisa will soon be in 10 countries as Visa expands its QR payment service for safe and easy mobile payments in emerging markets. It is already live in India, Kenya (started with Family Bank) and Rwanda, and will soon be available to merchants and consumers in Egypt, Ghana, Indonesia, Kazakhstan, Nigeria, Pakistan, and Vietnam.. (mVisa) allows consumers to use their mobile phones to make cashless purchases at merchant outlets, pay bills remotely and even send money to friends and family members by securely linking their Visa debit, credit or prepaid account to the mVisa application. Also any bank’s mVisa customer – regardless of where they bank – can transact on any mVisa merchant and merchants do not need to invest in POS infrastructure. Visa has partnered with Co-Operative, Family, KCB, and NIC banks.
  • Mastercard commitED to financially include 100,000 Kenyan micro merchants with Masterpass QR, a simple and secure digital payment solution. It will be introduced through various financial institutions. With it, consumers will be able to pay for in-store purchases by scanning the QR (Quick Response) code displayed at the checkout on their smartphones, or by entering a merchant identifier into their feature phones. Masterpass QR is currently being rolled out in Nigeria, Ghana, Rwanda, Uganda, and Tanzania.
  • Safaricom has issued 16,000 Lipa na M-Pesa cards in the pilot phase of a project that will launch later in the year. The Lipa na M-Pesa card uses pin and chip technology…It is also equipped with Near Field Communication (NFC) (which will) increases the speed at which customers make payments.
  • Verve: A dozen Kenya banks have partnered with Verve International, Africa’s leading low-cost payment network provider, in their push towards interconnectivity, cardless transact ability, and digital payments. Verve, best known as a card issuer has more than 32 million Verve cards and virtual/digital tokens issued across Africa and Verve is used in 19 African countries.
  • Pesapal adds American Express ​Pesapal integrated American Express into its payment platform on February 27, and  AmEx card holders can now use their cards to​ ​transact on any online payment portal that uses Pesapal. This is especially useful for hotels and other companies in the East African tourism space.  Pesapal which is in Kenya, Uganda, Tanzania, Zambia and Malawi and plans to expand to Nigeria in 2018 also offers an online booking engine for Hotels called ReservePort that’s used by Serena and Heritage brands.

Remittances

  • Facebook:  Facebook added international money transfers to its chat app. The service comes via London-based startup TransferWise in the form of a Facebook Messenger chatbot and enables transfers to and from the US, Britain, Canada, Australia, and Europe.
  • Bitpesa:  The company introduced an Africa to China corridor enabling users to send payments from Africa, directly to a Chinese bank account using bitcoin.
  • European choice: How much does it cost to send money from Germany to Kenya?@WehliyeMohamed posted that the global average cost for sending $200 in Q3 2016 was 7.42%, and that It cost him 6.7% to send money to Kenya. Then @MkenyaU answered that it costs 1.5% when he sends €200 from Germany and this reduces to 0.6% when he sends €500. He cautioned that some companies charge zero fees but their exchange rates are horrible as he shared a comparison of a dozen services available to send money from Germany to Kenya.

 

Mobile

  • Safaricom Mpesa: 10-year-old M-Pesa had 6 billion transactions in 2016 and is now in 10 countries – Albania, the Democratic Republic of Congo, Egypt, Ghana, India, Kenya, Lesotho, Mozambique, Romania, and Tanzania. A new feature in M-Pesa will enable users to see the cost of transactions. In the initial phase, customers will be notified of the costs after, and in the second phase customers will receive a pop up message informing them of any charges prior to the transactions, while the third phase will see the service being made available to value-added M-PESA financial products including M-Shwari, KCB M-PESA, Okoa Stima and M-Tiba. The second and third phases of the update will be rolled out in coming months.
  • There have been some calls and reports recommending that M-Pesa be split from Safaricom. This could have happened years ago, but it is more difficult now that M-Pesa is an entrenched and central part of Safaricom today.
  • Tala raised over $30 million in Series B financing, led by IVP and joined by Ribbit Capital.   Tala uses smartphone data to build financial identity ..  mobile app for Android aggregates more than 10,000 different data points on a customer’s device, including financial transactions, savings, network diversity, and geographic patterns, and builds a customized credit score, or financial identity. Tala operates in East Africa and Southeast Asia with its main top markets being Kenya and the Philippines. Tala has delivered more than one million loans totaling over $50 million, and more than one million individuals have accessed the product in East Africa alone. See how Tala compares to other (fintech) / phone-lending apps in Kenya.  Forbes termed this the largest Series B raised by a woman founder in recent memory.
  •  Zeep is a smart and simple mobile platform that helps young people (teens) nurture good  financial habits. They ‘learn by doing’ within the framework of a secure financial environment with guidance from their parents.

Companies to watch

Irish Tech News released a list of 38 Kenya fintech companies to watch in 2017; these include Abacus, BitPesa, Branch, Cellulant, Chura, FarmDrive, Kopo Kopo, M-Changa, Pesapal, Tala and Umati.

Summit

The FT Africa Payments Innovation Summit will take place on 29 March 2017..it will bring together 250 business leaders from various mobile and financial interest groups and explore challenges and opportunities inherent in these developments: from providing greater financial access to un-banked people across the continent to providing new services and opportunities for an emerging middle class.