Uchumi tops list of M-Pesa agents by transfer volumes

Uchumi has become Safaricom’s leading M-Pesa agent by transaction volumes, helping the supermarket to attract shoppers who use the mobile phone money transfer service while also earning the retail chain millions in service commissions.

Equity Bank is listed as the second biggest M-Pesa agent, Kenya Post Office Savings Bank is seventh while Naivas (Naivasha Self Service Stores) is ninth on a list of the top 10 agents provided by Safaricom.

Uchumi has M-Pesa agencies in all its 18 branches in Kenya, generating annual commission income of Sh36 million, according to an analysis by a local investment bank.

The supermarket’s CEO, Jonathan Ciano, declined to reveal how much Uchumi earns from the M-Pesa business.

“We are the biggest agent, but I cannot give the numbers,” said Mr Ciano. An investors’ research report on the retail chain by Faida Investment Bank (FIB) said Uchumi earns at least Sh3 million per month in commissions from M-Pesa transactions.

Uchumi took up the mobile money transfer agency in 2007, the year the service was launched.

Safaricom said in a statement that Rikana, Mesora, and Khetia supermarkets had been contracted to become M-Pesa agents while Tuskys, Nakumatt, and Chandarana had leased space to agents operating independently.

Mr Ciano termed the commission earned from M-Pesa transactions “a drop in the ocean” when compared with the group turnover, but said the main advantage in having M-Pesa outlets at Uchumi stores was the additional customers the service attracts.

In the last financial year the retailer made Sh10.77 billion in revenue, putting the commissions earned from M-Pesa at about 0.33 per cent of group income. Analysts said the convenience offered by M-Pesa provided an important source of new customers.

“What they are trying to do is increase customer traffic and that is why they are putting up specialised stores such as dry cleaners,” said Mr Samuel Mugacha, a research analyst at Faida Investment Bank.

Uchumi said at an investor briefing last year that it expected to have grown customers to 17.9 million in 2010.

The supermarket’s customers are also able to pay electricity bills at point of sale terminals and have access to other specialised stores such as pharmacies, which increases walk-in shoppers.

Mr Mugacha said that while the Sh36 million looks paltry when compared with group revenue, it nevertheless buffers the retailer since it operates in an industry characterised by thin margins.

Of the Sh10.77 billion in revenue that Uchumi made last year, the retailer made a net profit of Sh360 million, indicating a thin 3.62 per cent margin.

The retail industry has an average net profit margin of 3.3 per cent, second to the oil industry at 1.6 per cent — which makes any extra shilling earned significant.

Interest in value-added services such as the money transfer service and direct bill payments is also high in Uganda and Tanzania where Uchumi has operations, but the law does not allow for the retailer to sign agreements similar to the one in Kenya.

“A lot of people have been asking for it but we cannot operate outside the law,” said Mr Ciano.

Uchumi has 21 branches, 18 in Kenya, two in Uganda, and one in Tanzania.

jgachiri@ke.nationmedia.com


www.mobilemoneyafrica.com

This article was originally posted on Africa ICT & Telecom Network

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