KSh273bn now controlled by Safaricom in M-Pesa funds

The telco now holds nearly the same deposits as Stanbic Bank Kenya which held KSh272.9 billion as of the 6 months to June
KSh273bn now controlled by Safaricom in M-Pesa funds
From Left; CEO of Safaricom Telecommunications Ethiopia PLC Wim Vanhelleputte, CEO of Safaricom PLC Peter Ndegwa and Chief Finance Officer Dilip Pal during Safaricom’s 2023/2024 half-year financial results announcement on 9 November, 2023, at Michael Joseph Centre./Photo Courtesy

Safaricom’s customers are holding KSh273.9 billion in deposits in it’s mobile money service M-Pesa, making the telco one of the largest players in the financial services market.

The Nairobi Securities Exchange-listed firm has made the disclosure for the first time in it’s financial statements for the half year ended September. The funds grew by KSh74.9 billion from KSh199 billion at the end of March.

The move comes after Safaricom took control of M-Pesa Holding Company Limited —the firm that holds the cash powering it’s mobile money service— from London-based Vodafone Group Plc which is it’s ultimate parent company. Safaricom paid Vodafone a token amount of $1 (KSh151) in the transaction.

The telco now holds nearly the same deposits as Stanbic Bank Kenya which held KSh272.9 billion as of the 6 months to June. Other big banks have a larger deposit base including Equity Bank Kenya with KSh565.1 billion and Co-operative Bank of Kenya (KSh447.6 billion).

Safaricom’s disclosures indicate that M-Pesa is used more for personal transfers and payments rather than long-term deposits, explaining it’s relatively smaller deposit base despite having more customers compared to banks.

The telco’s one-month active M-Pesa customers grew 3.1% to 32.1 million in the half year to September, giving it the largest client base in the country.

Equity Bank Kenya has more than twelve million customers while Co-op Bank has in excess of 5 million clients. Stanbic Bank, which matches M-Pesa in deposits, has less than 1 million customers according to Central Bank of Kenya (CBK) data.

The use of mobile money platforms as deposit/savings vehicles has been limited by regulatory caps which have been eased gradually in recent years. The maximum mobile money account balance now stands at KSh500,000, having been raised from the prior limit of KSh300,000.

Banks meanwhile have no upper limit on account balances, dominating corporate business and also holding cash for high-net-worth retail clients.

Safaricom however earns more on transactions compared to banks, with the cost of cash transfers and withdrawals on M-Pesa, for instance, surpassing what the lenders charge despite multiple downward revisions mandated by the CBK.

M-Pesa revenue in Kenya grew 16.5% to KSh66.2 billion in the half year ended September, dwarfing Equity’s transaction-based revenue of KSh16.5 billion in the 6 months to June.

For Safaricom, taking control of the M-Pesa cash firm from Vodafone is expected to result in cost savings besides an opportunity to earn interest income from investing part of the deposits in short-term debt instruments like Treasury bills and bank fixed deposit accounts.

Vodafone earlier disclosed that M-Pesa Holding is a major cash cow, holding and investing hundreds of billions of shillings on a short-term basis amid rapid growth in customer deposits as well as transaction volumes and values.

Vodafone said M-Pesa Holding had short-term investments of €1.247 billion (KSh202 billion at current exchange rates) as of 31 March, 2023.

It also held M-Pesa customer funds amounting to €1.226 billion (KSh199 billion) on the same date.

“Balances included in the group’s consolidated financial statements for M-Pesa Holding at 31 March 2023 include short-term investments of €1,247 million and €1,226 million due to M-Pesa customers, recorded within Other investments and Other creditors, respectively,” Vodafone said.

The Kenyan telco had been doing a lot of business with M-Pesa Holding as part of it’s mobile money service which has evolved from a person-to-person cash transfer platform to offer payments and credit among others.

The company sold services worth KSh106.3 billion to M-Pesa Holding in the year ended March 2023, according to it’s latest annual report. This was an increase from KSh96.8 billion the year before.

M-Pesa Holding owed Safaricom KSh1.12 billion in the review period, down from receivables worth KSh1.16 billion at the close of the prior year.

The transfer of M-Pesa Holding to Safaricom marks the telco’s increased control of the major aspects of the mobile money service which was pioneered in Kenya but whose intellectual property was previously held by Vodafone.

Safaricom and South Africa’s Vodacom Group Limited in March 2020 teamed up to acquire the M-Pesa brand from Vodafone at a cost of KSh2.1 billion. The companies now hold the mobile money brand in their joint venture firm M-Pesa Africa which is registered in Kenya and which they own on a 50/50 basis.

The move saved Safaricom significant licence fees it was paying to the UK firm to use the brand. Vodafone is the majority shareholder of Vodacom with a 65.1% stake and also holds a five percent indirect equity in Safaricom.


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