- The All Share and NSE 20 Indices gained by 0.6% and 0.2% w-o-w to close the week at 148.04 and 1,796.88 respectively. This was mainly due to Safaricom gaining by 1.8% w-o-w (+2.0% in today’s trading session) which we attribute to positive investor sentiment following Central Bank of Kenya’s (CBK) directive to not extend the waiver on M-Pesa transactions below KES 1,000 effective January 2021.
- Overall market turnover and volume of shares traded declined by 23.2% and 17.4% to KES 2.0 billion and 84.2 million shares respectively. In the upcoming week, we expect activity to remain high on Safaricom with continued stability in the market.
The CBK Announces the Lapsing of Emergency Mobile Money Transaction Measures and Introduces New Pricing Structures
- After reassessing the emergency measures adopted to facilitate an increase in mobile money transactions (introduced in order to encourage the use of cashless payment system to curtail the spread of the Coronavirus) and consultations with Payment Service Providers (PSPs), the Central Bank of Kenya (CBK) has decided to allow the emergency measures to lapse on December 31st 2020.
- Notably, the expiry of the emergency measures signifies that the charges for mobile money transactions up to KES 1,000 (low value transactions) will be reinstated. The CBK has also introduced revised pricing structures in the mobile money ecosystem slated to take effect from January 1st 2021.
- The new pricing structure means is expected to have the following elements:
- The elimination of charges for person-to-person transfers of up to Ksh.100 to any customer and network.
- The elimination of charges for transfers between mobile money wallets and bank accounts.
iii. SACCOs regulated by the Sacco Societies Regulatory Authority (SASRA) will be permitted to charge a levy for transfers between SACCO accounts and mobile money wallets. These charges will however, be under the purview of the CBK.
- PSPs will propose pricing structures that reflect Pricing Principles introduced by the CBK.
- The decision by the CBK to not extend the waiver of charges on low value mobile money transactions bodes well for Safaricom; the company had earlier indicated that the CBK’s decision had cost them about KES 9.0 billion in the six months to June 2020. Thus, the reinstatement of the aforementioned fees will support growth in M-PESA revenues going forward. Additionally, Safaricom will also benefit from the increase in mobile money customers (which grew due to the fee waiver on low value transactions).
- On the flipside, the decision to permanently waiver charges associated with transfers between mobile money wallets and bank accounts is expected to reduce bank’s non-funded income going forward.
LONG TERM BUY – KENGEN
HOLD – KENYA RE