Oral East Africa>Mobile money profits slowdown on defaults At the hut of the story

Written by Oral East Africa

Mobile lending business experienced a slowdown for the six months to September, with banks using Safaricom Mpesa platforms reporting a decline in revenue over the first half of this year.

According to the half-year results released by Safaricom, which leads the business with a portfolio of Kes450 billion lent out via Fuliza in collaboration with KCB and NCBA, the overdraft window revenues dropped 3.9 percent to Kes1.9 billion.

M-Shwari offered through a collaboration of Safaricom KCB Bank and NCBA also saw revenues drop 7.4 percent to Kes1.1 billion while KCB Bank’s mobile money lending platform KCB-Mpesa saw revenues remain flat at Kes0.4 billion.

Ticket size

The decline in profits come at a time the lenders have stepped up the volume of their loans and the ticket size of disbursement.

KCB Mpesa ticket sizes grew 26 percent to Kes6948 while Mshwari ticket size increased Kes9,688 to Kesa10,170.

Over the past couple of months, digital lenders are experiencing delays in loan repayments and slowed appetite for new credit, blamed on the sustained street protests that disrupted the economic activities of their target customers.

Tough macroeconomic environment have also seen default rates rise to record levels with the ratio of gross nonperforming loans (NPLs) to gross loans in the banking sector standing at 16.3 percent in June 2024, compared to 14.5 percent in June 2023. NPLs in the mobile lending sector tend to be higher.

Exceptions

Absa Banks Timiza and KCB Bank’s merchant overdrafts are the only mobile money lenders that reported increases in revenues, coming from a low base of entry.

Timiza revenues grew 44 percent to Kes0.2 billion while KCB merchant overdrafts also saw revenues more than double to Kes0.2 billion.

Absa Bank Timiza and KCB’s merchant overdrafts came in strongly from a low base. The new entrants into this market have been able to leverage more market data to avoid revenue decline and attract customers locked out of other platforms to grow market share.

Bank snacks

Mobile money has exploded in recent times with banks joining the bandwagon following regulatory changes that have blocked hundreds of unlicensed players.

Banks have been seeking to diversify into this retail markets using technology to minimize credit risks, disburse small sums and make collections of the micro loans at low costs.

In 2018, Absa Bank got into mobile lending via the Timiza App that offers customers a wide range of convenient services including instant loans, money transfers, bill payments, airtime purchases, and insurance options.

The bank says about 15 percent of ustomers on Timiza, the digital platform access micro loans each month an indication of the popularity of the product.

Since its launch, Timiza, has attracted over five million customers. In 2023, the value of disbursements reached approximately Kes21 billion, with around 1.2 million loans disbursed to approximately 300,000 customers.

Standard Chartered Bank also finally launched its short-term mobile lending app for its clients dubbed SC Juza after several trials and delays since its first announcement in mid-2021.

The bank said the SC Juza app aspires to meet the growing demand for shortterm unsecured loans that are easily disbursed through mobile wallets.