ARPU, number of subscribers – voice, data, and value added services have been the hallmark of a telecom operator’s performance.  Of course, we would have expected things to remains more or less the same until the countries across the globe experienced what we call today as the digital revolution!

Rise of smart phones, growing use of data and digital consumers have given birth of a new breed of financial services being spearheaded by telecom operators. Mobile lending services such as M-Shwari, Orange Money, Branch, Tala, OneFi,, Jumo and many others have totally wrecked the traditional financing mechanisms. A mobile phone and internet connection is all one needs to make purchases, to invest in a dream home, to build a business, and even to meet exigencies.

The opportunities are immense, more so, as approx. 2 billion people around the world still do not have access to formal banking services.

Despite the growing population and significant volume of mobile users, traditional banks have failed to relax their money lending procedures. There are still lengthy and cumbersome chains of documentation, legalities and obligations. Agreed that this population may not exactly have an income statement or credit history, but would that be the only barometer of their loan repayment capability?

Realizing the potential of this untapped market, alternate lenders, especially in the developing nations such as Africa, India, Bhutan, among several others, are making every possible effort to bridge the credit gap. The objective is two-fold – improving financial access and winning higher customer acquisition and retention. Alternate lending utilizes the digital transformation technologies such as big data, artificial intelligence and machine learning to offer the most valuable loan proposition to the potential borrowers.  There is flexibility to provide credit through mobile apps, using AI algorithms that analyze alternative data such as phone records, bank records, mobile money and payment transaction history to assess credit risk for either individual consumers or small businesses. Lending is much faster, cheaper and inclusive!

But is it all that simple as it seems. Undeterringly, the answer is a big ‘yes’.

One can barely imagine the potential of these services, unless one takes notice of the exemplary performance of Safaricom’s M-Shwari and KCB M-Pesa – the mobile lending products.

M-Shwari is a lending-cum-savings product offered by Safaricom in collaboration with Commercial Bank of Africa, while KCB M-Pesa is a mobile loan service for M-Pesa customers in partnership with the KCB Group. The innovative mobile wallets offered through the mobile money platform, M-Pesa, allow people to deposit funds, earn interest and borrow money through their phones, hence surpassing the reliance on traditional banks.  There are no requirements for application forms, ledger fees nor charges for transferring money between M-Pesa to bank accounts and vice versa.

The ‘One-tap’ platform can be used to make both domestic and international money transfers, payment for goods and services, savings and loans. Customers can deposit as little as KSH 1 and borrow loans starting from KSH 50 to KSH 1 million on their M-PESA account at a facility fee of 7.5%, which is much lower than that of banks. At the same time, consumers are not required to have a minimum operating balance and there is no limit on the frequency of withdrawals. This has led to an increase in the subscribers’ access to banking services that were previously unbanked.

As on date, Safaricom’s M-Pesa is an industry leader in both the number of registered users and the huge transaction volume. The M-Shwari and KCB-M-Pesa collaboration have benefited as many as 30 million active users with daily transaction volume of about 4.5 million per day. To-date the service has disbursed more than KSH 230 billion in loans with the average amount per customer at KSH 3, 300.The attractive interest rates on micro-savings and lock saving accounts have helped Safricom win trust of customers who can now earn interest rate of up to 6.65%. Such level of customer engagement has helped M-Shwari grow its ARPU by over 38% to reach 29.3 billion KSHs in 2017.

The phenomenal performance of these innovative service providers has certainly created enough ground for others to follow league. A recent GSMA report estimated the total active mobile internet users in Africa to reach 500 million by 2020. This expansion would accelerate online purchases that would require funds to finance any kind of shopping or money transfer. The massive volume of a users’ personal and social information translates into a golden opportunity for Fintech companies and the MNOs. Alternate lending through MNO’s mobile money platforms not only helps to address the needs of millennials,  but also aids financial inclusion. Telcos have transformed from being a mere network operator to a platform for onboarding the unbanked and bringing them under the purview of mobile banking.

By overcoming the challenges of conventional banking that is expensive, time-consuming and complex, MNOs are benefitting from not only higher customer engagement and increased ARPU, but even newer streams of revenue. The new equation for measuring a telecom operator’s performance has become pretty wide to include telecom usage along with mobile money transactions (P2P transfers, utility bill payments, household purchases, transport, etc.), and lending volume.

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