Safaricom in new plan to clamp down hard on serial defaulters

Safaricom CEO Peter Ndegwa. [Wilberforce Okwiri, Standard]

Mobile operator Safaricom has moved to cushion itself against rising defaults across its product offerings amid economic uncertainty as more Kenyans fall on hard times.

The Standard has learnt that Kenya’s most profitable company plans to put up a new debt management tool to rein in serial defaulters.

Safaricom says the new upgraded system will have strong credit scoring and risk analysis on the ability of a customer to repay a loan.

It says the tool should be able to provide real-time credit scoring and risk analysis of customers based on their payment history and creditworthiness. It should also have “ageing reports” that provide a snapshot of the current status of outstanding debts, organised by the length of time they have been overdue.

“These reports can help identify which accounts are the most delinquent and require immediate attention,” says Safaricom in the internal documents seen by The Standard.

The debt management tool will also have customer segmentation reports that provide “insights into customer behaviour patterns and payment history, helping to segment customers by various criteria such as payment behaviour, creditworthiness, and demographics.”

“These reports can help tailor collections process to better serve the needs of different customer segments,” says Safaricom. 

The telco accrues different types of debts such as digital lending, postpaid billing debt as well as credit sales debt.

Safaricom says such debt is carried in different systems of its operations.

“As part of our commitment to effective credit and collections management, we are seeking a provider for a comprehensive and dynamic debt management system for our debt portfolios,” it says. 

Loan payments

The plan by Safaricom comes as consumers are expected to start to fall behind on their loan payments as the economy softens.

Safaricom is in the process of acquiring a new debt management tool amid rising cases of defaults by customers. [Wilberforce Okwiri, Standard]

This is according to executives at some of the biggest banks and companies although they note delinquency levels are still modest.

Increased interest rates and higher inflation, arising from domestic and external factors, leading to increased input prices and cost of production are seen as risks the credit growth.

Banks have, for instance, tightened credit standards specifically as a result of the current market environment.

Kenya’s medium-term growth remains bright as the economy recovers from a poly-crisis of global and domestic factors.

But risks to the economy remain as captured by a recent World Bank report.

“Not only was the economy’s growth momentum affected by the multiple challenges experienced in the year, but the cost of living rose on account of surging inflation,” says the World Bank in its latest Kenya Economic update, underlining the challenges faced last year.

“Real GDP is anticipated to rise to 5.0 per cent in 2023 and 5.2 per cent on average in 2024-25.”

Safaricom, part-owned by South Africa’s Vodacom and Britain’s Vodafone, is under pressure to create new revenue streams as its voice business matures.

The telco revealed recently it plans to set up an investment subsidiary to acquire promising local start-ups investing in new areas such as Artificial Intelligence (AI).

Safaricom's new debt management tool will provide real-time credit scoring and risk analysis. [File, Standard]

Safaricom reckons the start-ups will help it venture and scale up speedily into new business lines targeting the hugely untapped agriculture, education and health sectors, in turn, earning it new revenue streams.

This is as the leading telco races to diversify and grow new revenues amid slowing profit growth.

The telco posted a 22.2 per cent decline in net profit for the full year ended March 2023, the third consecutive drop in earnings, attributed to heavy capital investments in Ethiopia and a tough business environment.

Profit stood at Sh52.48 billion, down from Sh67.49 billion posted in the previous period.

Safaricom’s M-Pesa, launched in Kenya more than a decade ago is one of the most popular modes of payment in Kenya.

M-Pesa, started in 2007, has evolved from a basic mobile money transfer application into a fully-fledged financial service platform, offering loans and savings in partnership with local banks, plus merchant payment services.