Kenya’s Capital Markets Authority (CMA) has approved Safaricom’s second money market product, Ziidi. This new product, set to launch next week, is being developed in partnership with Standard Investment Bank, ALA Capital Limited, and Sanlam Investments East Africa Limited. Ziidi aims to address Kenya’s growing appetite for accessible digital investments, leveraging Safaricom’s extensive mobile network to reach more customers.

Building on the Success of Mali

In 2019, Safaricom ventured into the money market fund (MMF) space with its first product, Mali, in partnership with Genghis Capital. Over five years, Mali has shown significant growth, amassing an asset base of KES 3 billion ($23 million) by November 2024. This success laid the groundwork for Safaricom to introduce Ziidi, which promises to build on Mali’s achievements while addressing gaps and expanding its reach.

Like Mali, Ziidi will focus on low-risk investments such as government bonds and Treasury bills, catering to retail investors dissatisfied with traditional bank savings rates. It is designed to empower unit holders with diversified and accessible investment options, contributing to Kenya’s broader financial inclusion goals.

Aligning with Kenya’s Digital Economy Growth

Kenya’s retail investment market has been rapidly expanding, driven by increased smartphone adoption and rising digital literacy. As of 2024, the country has over 35 million active smartphones compared to 30 million feature phones. This growing digital penetration has created an ideal environment for digital financial products like Ziidi to thrive.

The launch of Ziidi aligns with the Kenyan government’s commitment to enhancing financial inclusion through digital platforms. Products like Ziidi not only democratize access to investment opportunities but also promote a culture of saving and investing among underserved and unbanked populations.

Leveraging the Power of M-PESA

Safaricom’s mobile money platform, M-PESA, remains its largest service revenue driver, generating KES 77.22 billion ($596 million) in the first half of 2024. M-PESA has been instrumental in advancing financial inclusion in Kenya, providing millions with access to financial services.

Ziidi’s integration into M-PESA will further solidify the platform’s position as a comprehensive financial ecosystem. Customers will be able to invest in Ziidi directly from their M-PESA wallets, ensuring convenience and accessibility. This approach not only diversifies Safaricom’s revenue streams but also strengthens M-PESA’s value proposition as a hub for financial services.

Competing in a Dynamic Market

Ziidi enters a competitive landscape dominated by banks, insurers, and fintech companies offering money market products. These products are particularly appealing to customers seeking higher returns than traditional bank savings accounts while maintaining low risk. By leveraging its extensive mobile network and established trust among users, Safaricom is well-positioned to capture a significant share of this market.

The new fund’s structure will likely mirror Mali’s model, which allows investments starting from as low as KES 100 ($0.77), with daily caps and instant withdrawals to M-PESA wallets. Mali’s fee structure includes a 2% annual fund manager fee, 0.2% trustee fee, 0.15% custodian fee, and a 15% withholding tax on interest earned. Although Ziidi’s specific terms and fees have not yet been disclosed, similar accessibility and affordability are expected.

Addressing Challenges and Opportunities

Financial Inclusion

One of Ziidi’s core objectives is to target the unbanked and underbanked populations in Kenya. Despite the significant strides made by M-PESA, many Kenyans still lack access to formal financial services. By providing an easy entry point to investments, Ziidi aims to bridge this gap and foster economic empowerment.

Diversifying Revenue Streams

As Safaricom faces challenges in its voice, data, and SMS businesses due to market saturation and competition, initiatives like Ziidi represent a strategic move to diversify revenue streams. The focus on financial services aligns with global trends where telecom companies increasingly venture into fintech to enhance profitability and customer retention.

Economic Impact

Money market funds like Ziidi contribute to economic development by channeling savings into productive investments such as government bonds. This not only provides individuals with attractive returns but also supports national development projects by increasing liquidity in the financial system.

Educating Investors

A critical challenge for Ziidi will be educating potential investors about the benefits and risks of money market funds. Many Kenyans are unfamiliar with such investment vehicles, necessitating targeted awareness campaigns to build trust and drive adoption.

Regional and Global Context

Kenya’s leadership in mobile money innovation positions it as a benchmark for other African nations. The success of M-PESA and associated products like Ziidi underscores the potential of digital finance to transform economies. As Safaricom expands its footprint into other African markets, Ziidi’s success could serve as a blueprint for similar initiatives across the continent.

Globally, money market funds have gained popularity as a low-risk investment option amid economic uncertainties. The Federal Reserve’s interest rate hikes in the United States, for example, have spurred increased demand for such funds. Ziidi’s launch aligns with this trend, offering Kenyan investors a secure avenue to grow their savings.

Future Prospects

The approval of Ziidi signals Safaricom’s continued commitment to innovation and customer-centric solutions. As the product rolls out, its performance will likely influence the development of other investment products, further solidifying Safaricom’s position as a leader in digital finance.

Moreover, partnerships with industry players like Standard Investment Bank, ALA Capital Limited, and Sanlam Investments East Africa Limited bring additional expertise and credibility to the venture. These collaborations ensure that Ziidi is backed by robust financial management and aligns with international best practices.

Conclusion

The launch of Ziidi represents a significant milestone in Safaricom’s journey to redefine financial services in Kenya. By leveraging its technological infrastructure, trusted brand, and partnerships, Safaricom is poised to make investing more accessible and inclusive. As Ziidi unfolds, it has the potential to not only transform individual financial habits but also contribute to Kenya’s broader economic growth and digital transformation.

Safaricom’s innovative approach continues to set the pace for the integration of technology and finance, showcasing how digital solutions can drive meaningful change in emerging markets.

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photo source: Google

By: Montel Kamau

Serrari Financial Analyst

27th November, 2024