Value of mobile money deals in Kenya up 13% to record $6Bn

• Central Bank of Kenya says active mobile subscriptions hit 66.8 million by December 2023 compared to 65.7 million a year earlier.
• Increasing usage of mobile money saw the banking industry in Kenya experience a drop in the value of banking transactions via bank agents to $10.5 billion.
• Kenya is a trailblazer in the adoption and usage of mobile money across Africa.

A steady rise in the use of cashless transactions as well as the opening of 8,555 new mobile money agent shops in Kenya drove the value of mobile money transactions up by 13.8 percent to record KSh788.35 billion or $6 billion in 2023.

Kenya has been a trailblazer in the adoption and usage of mobile money across Africa since the launch of pioneer cash transfer platform M-PESA by Safaricom PLC in 2007.

“Amidst the increasing adoption of technology and the widespread use of mobile phones in daily life, coupled with a rising demand for convenient financial services, the total count of active mobile subscriptions has risen from 65.7 million in December 2022, to 66.8 million by December 2023,” Central Bank of Kenya noted in its industry supervision report for the 12 months ended December 2023.

“This growth represents an increase of 1.1 million new mobile subscribers. The number of active mobile money agents marginally increased by 2.68 percent from 318,607 to 327,162,” the regulator added. In 2022, Kenya’s banking industry recorded KSh708.06 billion or $5.4 billion in the value of mobile money transactions.

Mobile money usage cuts visits to bank agents

Meanwhile, the increasing usage of mobile money saw the banking industry in Kenya experience a drop in the value of banking transactions undertaken through bank agents,  decreasing to KSh1.7 trillion or $ 10.5 billion by December 2023 compared to KSh1.8 trillion or $15.2 billion recorded in the previous year.

This dip came even as banks in Kenya saw a 17.5 percent surge in deposits to $42.6 billion (KSh5.56 trillion) from $37.5 billion (KSh4.9 trillion) realized in December 2022 on account of new agency banking shops opened during the year as well as rising usage of mobile banking services.

Agency banking has been taking root in Kenya, giving lenders an affordable path of spreading wings in far-flung areas while avoiding the hefty costs of establishing and running a brick-and-mortar branch.

Last year, the CBK report shows that 16 commercial banks in Kenya opened a total of 87,531 agency banking shops across the country while five microfinance banks entered into agreements with 677 entities to operate agency banking services.

“As at December 2023, commercial banks recorded 82,780 bank agents, while MFBs agents were 921. The change was an increase of 4,409 commercial bank agents (5.6 percent) and a decrease of 277 microfinance bank agents (25.1 percent),” CBK explained.

However, the report notes that the big players in the industry including regional lenders Equity Bank, KCB Group and Cooperative Bank accounted for over 90 percent of the approved bank agents.

In the year under focus, Equity Bank was operating 40,211 agency banking outlets while rival, KCB Bank Kenya Limited was working with 24,055 agents. At the same time, Cooperative Bank of Kenya Limited reported 15,519 agents.

The dominant players within the microfinance financial services segment also enjoyed the lion’s share of agency banking services with CBK noting that Kenya Women Microfinance Bank Limited led with 127 agents as close competitor Faulu Microfinance Bank Limited closed the year with 409 agents spread across Kenya.

Despite this massive presence of agency banking in Kenya, the onslaught from mobile money transaction offering saw the number of banking transactions undertaken through bank agents dip by 8.3 percent to 145.3 million in December 2023 from approximately 158.4 million transactions a year earlier.

“The decrease in total transactions was mainly as a result of decreases in transactions relating to cash deposits, cash withdrawals, and payment of bills. The decrease was attributed to increased use of mobile money and internet banking,” noted CBK.

Consolidation, Mergers and Acquisitions in Kenya’s banking industry

Last year, Kenya’s banking sector welcomed new players in deals that saw the partial purchase of stakes in both commercial banks and microfinance financial services providers. In the 12 months that ended December 2023, four commercial banks and two microfinance lenders were either wholly or partially acquired by strategic investors.

January 2023, the industry witnessed the entry of two new players with Cairo-based Commercial International Bank (Egypt) S.A.E. (CIB) acquiring a 49 percent stake in Mayfair CIB Bank Limited (MBL), which has since rebranded to Commercial International Bank (CIB) Kenya Limited.

In the same month, regional banking giant Equity Bank Kenya Limited (EBKL) acquired certain Assets and Liabilities of Spire Bank Limited (Spire) effective January 31, 2023. Spire Bank, a spinoff of the teachers’ savings and credit initiative, Mwalimu Sacco, was deeply indebted, and on the brink of collapse for breaching statutory requirements.

Additionally, at the tail end of Q1 2023, Somalia-based Premier Bank Limited, ventured into Kenya by acquiring 62.5 percent of the shareholding of First Community Bank Limited (FCB), which has since rebranded to Premier Bank Kenya Limited.

Another key development in Kenya’s banking scene was the acquisition of 55.8 percent shareholding of Maisha Microfinance Bank Limited (Maisha MFB) effective May 1, 2023 by Cactus Cantina Investments Limited (Cactus Cantina).  After the acquisition, Maisha MFB evolved into On It Microfinance Bank Limited.

Further Shorecap III, LP (Shorecap) acquired a 20 percent shareholding of Credit Bank PLC (CBP) effective June 15, 2023 even as HOPE Advancement Inc. (HOPE) sealed a deal for 51 percent stake in SMEP Microfinance Bank PLC (SMEP MFB).

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