Safaricom PLC has taken an insurance cover for its M-Pesa services as it diversifies its mobile money services.
The company insured M-Pesa for KSh 52.9 billion against non-payment of user loans. M-Pesa loan repayment cover will help the telecommunication company to avoid risks associated with setting up a bad debt reserve on its balance sheet.
According to Business Daily, Safaricom took the cover from Africa Trade Insurance (ATI) and minet Kenya in the financial year 2021.
Safaricom M-Pesa loan services are offered in partnership with commercial banks, which could pose counterparty risks. This pushed Safaricom to take the cover as it grows its mobile money services due to the growth in cashless transactions.
Debt collectors In July 2022, Safaricom said it will revamp its debt collection services at the backlog of increased mobile loan defaults. The firm sought auctioneer services to recover unpaid Lipa na M-Pesa loans in case of default.
The telco previously blacklisted defaulters on the credit reference bureaus (CRBs).
“At any time after an event of default has occurred which is continuing, we may, without prejudice to any other right or remedy granted to us under any law… take reasonable measures including engaging an independent debt-collection agency, to recover the amount in default (and/or) submit information concerning the event of default to credit reference bureaus, subject to applicable laws,” Safaricom said.
M-Pesa revenue Safaricom’s M-Pesa services recorded KSh 50 billion in gross profit for the year ending March 2022.
The increase in profit accounted for nearly half of the telco’s profit before tax of KSh 102.2 billion in the same year under review.
The growth in M-Pesa revenue is attributed to an increase in mobile money uptake exacerbated by trends in technology and the COVID-19 pandemic.
