Serrari Group

NCBA Bank Kenya Sees 34% Decline in Digital Platform Revenue

NCBA Bank Kenya faced a notable downturn in revenue from its digital platforms, including Fuliza, Mshwari, and Loop, with a substantial 34% drop, amounting to Sh2.59 billion in the financial year ending December 2023. This decline was primarily attributed to reduced charges on the Fuliza overdraft facility.

Despite an increase in the volume of transactions through Fuliza, Mshwari, and Loop, the bank’s revenue from these platforms fell from Sh3.92 billion earned in a similar period the previous year. The reduction in revenue coincided with a period during which NCBA and Safaricom, co-partners in the Fuliza loans, revised the product’s tariff downwards.

Loans facilitated through the Fuliza service, enabling M-Pesa users to overdraw on their balances, saw a notable growth of 26.9%, reaching Sh789.6 billion from Sh622.2 billion. NCBA earns revenue by underwriting this service.

Mshwari loans also experienced an uptick, rising by 17% to Sh102.4 billion from Sh87.5 billion, while the value of loans facilitated through Loop doubled to Sh1.2 billion from Sh0.6 billion.

In October 2022, NCBA and Safaricom implemented a reduction in daily charges on overdraft loans, with fees on loans ranging between Sh1,000 and Sh1,500 dropping to Sh18 from Sh20. Additionally, a three-day interest-free window was introduced for borrowers of amounts between Sh101 and Sh1,000. Those borrowing Sh500 beyond the three days now incur a fee of Sh2.50, down from the previous Sh5.

Despite the decline in revenue, the lower charges on Fuliza have resulted in higher disbursements, potentially compensating for the foregone fees in the future. The Sh167.4 billion Fuliza disbursements through NCBA imply consumers took overdrafts averaging Sh458.6 million a day in the reviewed year.

However, the decrease in revenue from digital platforms in Kenya has impacted NCBA Group’s digital business revenue, dropping by 15% to Sh4.27 billion from Sh5 billion. Although there was growth in revenues from similar products in Tanzania, Uganda, and Rwanda, it wasn’t sufficient to offset the losses experienced in Kenya.

NCBA has been actively diversifying its business model by strengthening both its banking and non-banking subsidiaries. “Our focus on enhancing the contribution from our subsidiaries has demonstrated success with our subsidiaries contributing 15% from two percent in 2022,” remarked NCBA.

Regional banking subsidiaries contributed 12% of the pre-tax profit, while non-banking ones brought in three percent of the pre-tax earnings, reflecting a strategic shift in the bank’s operational landscape.

photo source: Google

By: Montel Kamau

Serrari Financial Analyst

5th April, 2024

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