Safaricom is testing a unit trust investment product on its M-Pesa platform and will commercially launch a new mobile savings service as it races for a larger piece of the financial services market.
Under the unit trust product, Safaricom will allow its subscribers to make small payments via M-Pesa that will be placed in a collective scheme for investments in assets like stocks, fixed bank deposits, and government securities.
The subscribers will get a return either from dividends or capital growth of their units in the latest plan to grow the mobile money platform beyond sending and receiving cash, tapping loans as well as paying for goods to include insurance and wealth management.
The giant telco also said that it is awaiting a regulatory nod to introduce the new savings product, dubbed Mali (Kiswahili for wealth), which will offer interest rates of 10 percent on deposits capped at Sh70,000 per saver based on a pilot test. It started testing the savings product in December.
“We are in the final stages of piloting a unit trust investment product enabling customers to create and retain wealth,” said Michael Joseph, a director at Safaricom who served as acting CEO till April, in an online investor briefing last week.
“The new market-based app which will launch shortly will aid in enhancing M-Pesa as a lifestyle platform.”
Safaricom did not divulge details of the unit trust product, but it is expected to partner with a fund manager already licensed by the Capital Markets Authority (CMA), who will also approve the new product.
The product will generate new revenues from M-Pesa with Safaricom expected to earn fees from the wealth management service.
Revenue from M-Pesa jumped 12.4 percent to Sh84.4 billion in the year to March, accounting for a third of Safaricom’s revenues.
The firm forecasts M-Pesa will account for half of its sales in coming years as revenues from voice and SMS flatten.
“We view the combination of lending and wealth management services as a further boost to earnings from financial services,” Standard Investment Bank said in reference to the Mali product earlier. “The product possibly includes a partner bank and a fund manager.”
Policymakers say Kenya suffers from a low national savings rate and analysts said that Safaricom could be looking to target the untapped market with the new savings product.
At 10 percent, the return from Mali is nearly double the current interest rate that banks are paying on savings.
Started 12 years ago as a service to allow Kenyans without access to the banking network to transfer money via mobile phones, M-Pesa now offers loans and savings in conjunction with local banks as well as merchant payment services.
Safaricom launched an overdraft feature called Fuliza on January 7 last year.
Fuliza is underwritten by Kenyan lenders KCB Group and NCBA Group, which already had partnerships with Safaricom to offer short-term loans on the M-Pesa platform under M-Shwari.
It is not clear if the deposits in the new savings product will be used to back loans, akin to the mode of operations in banks.