Category Archives: Safaricom

Ineos 1:59

Today Kenya stood still, and the world watched as Eliud Kipchoge ran a specially staged marathon in Vienna Austria completing it in under two hours. The event dubbed “Ineos 1:59” was an unprecedented partnership event, backed by British chemical company Ineos and its billionaire Chairman,  Jim Ratcliffe.

Kipchoge ran the 42 kilometre-length course on a time of 1 hour 59 minutes and 40 seconds, dipping under the two-hour mark for the first time in marathon history. This was his second attempt at breaking the milestone mark. He had tried this in May 2017 and come 25 seconds short in another special run at the historic Monza Formula One track in Italy. That was in a project supported by Nike, dubbed “Breaking2.”

Eliud Kipchoge is currently the world record holder for the marathon with a time of 2:01:39 that he set at the 2018 Berlin marathon. He is also the reigning Olympic champion (2016 Rio games), and at 34 years old, has won 12 of 13 competitive marathons he has entered since 2013 including the London marathon four times, and the Berlin marathon three times.

Also used in support of the Ineos 1:59 challenge was an electric-powered Audi SUV, driven at a constant pace throughout the race, that projected laser beams to guide Kipchoge and his rotating team of forty-one elite pacesetters from across the world – Japan, Australia, Switzerland, Turkey, USA, Uganda, Ethiopia, and several of his Kenyan compatriots

Local brands that have supported Kipchoge include Safaricom and Isuzu East Africa who signed him up as a brand ambassador in September 2017.  And last week, Safaricom changed its M-Pesa brand to read “Eliud 1:59” for seven days and rolled out a free 1.59 gigabyte data bundle to enable Kenyans to watch Kipchoge’s run on their phones or their home devices via YouTube.  It is reported that over 3 million subscribers signed up for the special data bundle. 

Safaricom eye international expansion using M-Pesa

Safaricom announced another year of record earnings through innovation and payments, despite a tough economy in Kenya and with an extra bonus for their shareholders.

For 2018, Safaricom recorded revenue of Kshs 240.3 billion (~$2.4 billion), an increase of 7%, and a net profit of Kshs 63.9 billion. The growth was attributed to M-Pesa which, grew by 19% to Kshs 75 billion, and which accounted for 75% of the revenue growth in the year. They also reported that there were 22.6 million active M-Pesa customers and these customers made an average for 12.2 transactions a month, up from 7.4 transactions a month, three years ago.

Chairman Nicholas Ng’ang’a said it had been a challenging year with constrained credit (from bank interest rate caps) and inflation limiting discretionary income while the government had added taxes on mobile transactions  Unlike last year‘s event where the company had earnings before interest guidance of Kshs 89.6 billion, this year CEO Bob Collymore was present at the Friday morning investor briefing at the company’s headquarters complex in Nairobi where he announced that he was proud that the company had achieved an EBITDA of 50% which was unprecedented in the mobile world.

Ng’ang’a announced that the company would have to look for growth elsewhere beyond Kenya, while Collymore said this could be by taking charge of the M-Pesa brand from Vodafone and leading the expansion across Africa with new shareholder Vodacom and he cited new M-Pesa global partnerships that Safaricom had signed with  PayPal, Google (play store) Western Union and AliExpress.

This year the company rolled out Fuliza, the world’s first mobile phone overdraft that has seen over Kshs 45 billion borrowed so far. In terms of banks, Collymore said the era of competing with them was now over, and there would be more collaboration. Last week, Safaricom renewed a partnership with Equity Bank that will aim to improve financial inclusivity, cash management and security.

From the 2018 results, Safaricom will pay shareholders Kshs 1.25 per share, an amount totalling Kshs 50 billion. They will also, for a second time since listing, pay a special bonus dividend of Kshs 0.62 per share – totaling Kshs 24.84 billion.

 

Rewiring Education

This week, the M-Pesa Foundation Academy and Nairobi International School hosted author John Couch, who was first Vice President of Apple Inc., for a talk session on “rewiring education.” The chief guest was Kenya’s Cabinet Secretary for ICT, Joe Mucheru. 

Rewiring Education speakers.

Excerpts from the rewiring education Q&A: 

  • Kids come into employment fully trained in things that are no longer relevant. They then have to unlearn that, and we are working with universities to modernize the curriculum.
  • Schools have to hire teachers who are registered with the Teachers Service Commission. But those who are there only have B.Ed (Bachelor of Education degrees), and lack skills to stand in front of students who are far ahead of them in technical knowledge.
  • The Kenya government has developed a brilliant curriculum, that will start next year, but teachers have not been trained to deliver this. International schools take three years to retrain a teacher.
  • The median age in Kenya is 19 years, and half the civil service is made up of teachers.
  • The most important skill to have in life is (to embrace) continuous learning.
  • Schools can currently evaluate student memorization, but not their creativity and innovation abilities.
  • “When I was studying at Berkeley, California in the 1970’s, people thought the social revolution was taking place in the streets, but I knew it was taking place inside computers.”
  • Safaricom set out to provide connectivity to all schools in Kenya and the government was to provide the devices.
  • “The way we are teaching kids is a disservice and I am in the process of suing the UK government for wasting thirteen years of my life!”
  • The US also treats teachers as a union problem, not a professional occupation. Teachers are underpaid and under-trained.

Digital App Loans: Understanding Borrower Behavior

An Interesting conversation was started by a tweet by Francis Waithaka on the true borrowing of costs of app loans that hundreds of Kenyans take every day by making a few clicks on their phones.

It elicited a lot of comments on the cost of finance offers to Kenyans, since an interest capping law passed in 2016 that restrict banks to lend at a maximum of 14%, the lack of regulation of app loans who may be taking advance of Kenyans by charging usurious rates etc. It also led to a mention of a research report from Micro Save about the digital credit landscape in Kenya that was shared by one of the authors.

The Microsave Report (PDF) titled “Where Credit Is Due: Customer Experience of Digital Credit In Kenya”  had lots of insights. It was drawn from feedback from 1,009 farmers located in 50 villages, equally split between Central Kenya and Western Kenya, and also with an equal number of men and women in the study.

At the end of it, the report makes some recommendations to the Communications Authority of Kenya and the Central Bank of Kenya – such as to control the type of messaging sent by text to consumers, and to require app loan companies to share information and to list all defaulters, respectively.

Habits of Borrowers 

  • There is a preference for Chama’ s, SACCO’s and M-Shwari as a source of funding. App loan amounts are too small for significant investments.
  • Majority of the customers took up loans to smooth consumption, emergencies or to boost business.
  • They don’t understand terms and conditions of app loans and they don’t understand credit reference.
  • There are three types of borrowers: repayers (who pay loans on time), defaulters  (who don’t understand the consequences of being listed), and jugglers who take both traditional and app loans – but if they are financially stretched, they are more likely to repay the traditional loans.
  • Customers have learned to game the system through timely repayment of loans and juggling multiple borrowers.
  • There is no extra “PIN” required to request and withdraw an app loan and some family members have done this in secret leading the phone owner to default on a loan.
  • Digital credit usage doubled in Kenya between 2015 and 2016, with awareness and usage of digital credit by far lower in rural Kenya.
  • Digital credit, which offers privacy, is replacing shop credit and family/ friends as financiers.
  • The simplicity of the loan application procedures matters;  too much information requested or if there are too many variables that make it confusing, makes potential borrowers drop off.

Phone Types 

Download a loan app or use USSd

  • App usage is rather low – and this probably related to lower usage of smartphones as their batteries rarely last a full day as compared to cheaper feature phones that retain battery charge for several days of use.
  • Phones are mainly used for money transfer,  deposits, and withdrawals. There is little usage to get information or to browse the internet
  • 64% of respondents in the survey had a basic phone (57% in 2015). Smartphones were 14%, growing slightly and off-setting feature phones which declined slightly to 26%.
  • Loss of a phone may result in a  borrower defaulting on repayment.

Credit Reference Bureaus

  • Formal lenders require clearance from a credit reference bureau (CRB) which costs $22 (i.e Kshs 2,200) and that may exclude borrowers from formal finance. App loans don’t require this, e except that borrowers have not been black-listed.
  • One concern is there is little understanding of credit reference bureaus, and of channels for redress of any disputes.
  • Not all fintech’s report loans to credit reference bureaus.

App loan costs

  • High loan/interest charges are not a concern as they are comparable to other informal money lenders

At the time of the survey, M-Shwari issued 62 million loans (worth Kshs 1.3 trillion), while Equitel and KCB about 4 million each. In comments to accompany the release of their 2017 bank results last month, KCB had 13 million mobile customers, Equity Bank has 12.1 million, while a  CBA statement noted that the bank also serves 33 million mobile savings & loans customers, in East Africa, in partnership with mobile money operators.

PayPal in Kenya: Part II M-Pesa Links Up

PayPal’s reach in Kenya has now been extended to M-Pesa wallets, allowing users of the service to get payments directly to their mobile phones, thanks to a partnership between Safaricom, PayPal and TransferTo.

Under the new service, qualified M-Pesa customers can link their PayPal accounts to M-Pesa wallets, using an “M-PESA PayPal portal”  that will enable them to buy goods and services using M-Pesa to top up their PayPal accounts and this is expected to benefit international ecommerce and remittances. They can also withdraw cash at 148,000 M-Pesa agents around Kenya. M-Pesa has 27.8 million active customers while Nasdaq-listed PayPal has 227 million and is available in 200 markets, allowing merchants to receive funds in more than 100 currencies and withdraw funds in 56 currencies. TransferTo is a Singapore-based cross-border mobile payments enabler. 

PayPal has officially been in Kenya for almost five years exclusively with Equity Bank, dating back to 2013 when Equity and FNB were the only authorized Paypal partners in Africa. Equity is still the only bank in Kenya that PayPal users can withdraw with and during 2017, Equity reduced the PayPal withdrawal time from 8 days to 3 days. Last week Equity reviewed the cost of getting paid using PayPal to as little as 1% for withdrawal amounts that are over $5,000 (~Kshs 500,000), versus 1.5% for payments below $500 (~Kshs 50,000).

At the Equity Bank 2017 results announcement last month, CEO James Mwangi confirmed that usage of PayPal by Equity Bank customers had overtaken traditional remittance channels of Western Union and MoneyGram. PayPal was used for payments worth Kshs 6.2 billion in 2017 by Equity customers, up from Kshs 3.6 billion the year before, and accounted for 21% of the Kshs 30.2 billion worth of payments with another new service provider, Wave accounting for 52% of the value of transfers.