The Safaricom Split

There has of late been a clamor to split the Safaricom business. We take you a bit down memory lane first on how M-Pesa first got started.

The launch of M-Pesa in 2007 was a game changer as Kenyans could send and receive money from their mobile phones with ease compared to traditional methods. Within two years, M-Pesa had over 5M customers with approximately 10K daily new registrations with cumulative Person to Person transfers of KES 153.38B, accounting for 3.5% of the country’s Gross Domestic Product. Airtel Kenya introduced Airtel Money in 2011, and Telkom Kenya’s T-Kash entered the market in March 2018. These services have not given serious competition to M-Pesa. 

However, what is striking is the aggregate use of these platforms by businesses. The latest Sectoral Statistics by the Communications Authority of Kenya (CA) show that in FY 2021/22, the total value of business-to-business (B2B) mobile money transfers reached KES 8.82T. This number was KES 994.6B 2 years ago. With regards to Non-Funded Income (NFI) of the banking industry, a linear regression model that takes the total NFI of the largest 9 listed banks as the dependent variable and B2B deposits as the independent variable shows that 79.33% of the variation in NFI can be attributed to B2B Mobile Money deposits.

Since the CA only regulates telecommunications operations, the pain point is the oversight of financial intermediation functions given the volumes transacted hence the growing clamor to split these firms. Last week, in response to a question regarding this directed at the Central Bank of Kenya Governor during the induction of Members of the 13th National Assembly, he hinted at ongoing works whose outcome would be visible from January 2023.

Back in July, Airtel Kenya in July spun its Mobile Money operations to Airtel Money Kenya Limited. Telkom is yet to split its mobile money unit and has cited approval delays from CA. The aftermath of these splits will likely be a strong, standalone mobile money industry under a better view of regulatory agencies. We will be keeping an eye on how the authorities steer the process and how that upends the status quo.