M-PESA to Offer Services Such as Car Loans if it Splits from Safaricom

A proposal to split M-PESA from its parent company Safaricom PLC is currently underway, a move that will give Africa’s largest mobile money platform a leeway to expand its financial services.

According to Safaricom, if the proposal passes, M-PESA will have a separate license and be regulated by the Central Bank of Kenya (CBK) instead of the Communications Authority (CA).

Under CBK, M-PESA will deepen its financial lending by expanding into offering high-value instruments such as car loans.

“If we split M-PESA from Safaricom and it falls under the regulation of the CBK, we could apply to the regulator to provide various services not directly related to telecommunications services. It could be financial services. For instance, we could lend you money to buy a car – something we don’t do today. In short, this presents an opportunity to provide a wide range of services,” said Michael Joseph, Safaricom PLC’s Chairman.

The plan to have M-PESA as an independent entity will give banks a run. It will bring competition much closer to the doorsteps of such lending institutions.

M-PESA, established in 2007 by Safaricom and Vodafone, now has over 51 million customers, 465,000 businesses, 600,000 agents, and 42,000 developers across Kenya, Tanzania, Mozambique, the Democratic Republic of Congo, Lesotho, Ghana, and Egypt.

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The service processes more than 61 million transactions a day, making it Africa’s largest fintech provider. With more people across the continent shifting to smartphones, 3G, and 4G broadband, M-PESA continues to evolve to become the ultimate digital financial services provider.

By becoming an independent financial services provider, M-PESA will leverage its broad customer base to enhance the provision of overdraft facilities for working capital needs, such as boosting stock.

Initially, the idea to split M-PESA from Safaricom was met with resistance amid the debate about dominance. However, with the growing Fuliza service, which averagely accounts for 1.3 billion shillings in overdrafts a day, and its plans to expand into Fuliza for business, a CBK regulation will clear the hurdles experts to worry about.

Currently, the amount M-PESA customers can transact in a day is capped at 300,000 shillings. The maximum per transaction is 150,000 shillings. The same goes for the Pochi La Biashara product for small businesses.

Under CBK’s money anti-money laundering regulations, a registered M-PESA user cannot send more than 35,000 shillings to an unregistered user. Safaricom has also limited the Fuliza amount to 70,000 shillings to adhere to the regulations.

A CBK license will help M-PESA avoid such limitations and offer more to people with repayment history.