Ecocash Loans- Game changer ? Opportunity or Threat ? For whom

With the launch today of Ecocash Loans, following in quick succession from Ecocash Save accounts, Econet wireless has yet again read from the M-Pesa script to be the dominant financial services provider in Zimbabwe.

Ecocash is a bank, with the largest number of customers at 3.5M registered users. Having shaken up the financial services market and largely to reach the unbanked, sectors in the micro-finance are now jittery, they have come to eat their cake too. Banks have been the traditional threat to microfinance targeting the same customers, that today has changed with Ecocash entry into the lending space.

In the last 6 years M-Pesa has revolutionized banking in Kenya, with the 70,000 easy set-up branches( that you call agents) and with a total of 17m customers is the largest bank in Kenya and Africa. Holding close to a billion dollars in monthly deposits, controlling the mobile money transfer market with a billion dollars transferred monthly in peer to peer transfers, and in the last two years have diversified into savings and lendings.

The product that Ecocash Loan mirrors, M-Shwari had more than 350,000 micro loans within the first four months of launch. 60% of Kenya’s population is between 15-35years.To them, convenience is a lifestyle and mobile is their primary device; mobile banking has become a mass market service within a short period of time. 75% of M-shwari customers are 18-35years. They are accustomed to interacting with every sector of the economy via mobile.

How does this compare to Zimbabwe ?

With among highest penetration rates in the region, Zimbabwe’s telecom sector has outdone Kenya’s in terms of reach.

While I like to think that the markets are similar, a key difference in the markets has been the approach that Safaricom took. Safaricom opened up its platform massively for business. Any and every business can virtually acquire a mobile service within two to three weeks. The VAS aggregation space is regulated by the Communications Commission of Kenya(CCK) resulting in nearly 100-150 VAS players in the market, all service dynamic segments.

Mobile services are launched in a short window of time ( 2-3 month deployments) and virtually every sector is covered, from Financial services, Manufacturing, Transport, Education , Health, Agriculture, FCMG , just to name a few. Every sector of the economy has one or two key mobile services running with industry leaders having iterated two to three services in the last three – six years. You could call it a very hotly contested market. One in which Econet wireless failed to penetrate.

Cement Manufacturers have mobile codes for retail and distribution, pharmaceuticals have services for drug authentication, m-health, education services launched on SMS to manage training, Apps for agriculture, solutions for transport, mobile banking for Saccos and microfinance not just banks. Not to mention the digital content space with local content as a key commodity for players. We are talking mobile services that tell you when your cows should mate!

I postulate, and this is just my opinion, in their approach Safaricom, enabled innovation by allowing VAS aggregators access to services, and in that way, ensured their customer base was served in virtually every sector. Its not just allowing access, but maintaining a standard operating procedure for VAS players to connect services. Now it didn’t come easy, and Safaricom has often been described as a “market bully” or monopoly, but in my experience with Econet, they are a benevolent dictator. They set the terms, they set the rules, but the field is open for you to play. It’s your focus, commitment and  resourcefulness in this crowded market that will get you ahead, the operator doesn’t really get in the way of your business or the basic access to service.

 I think Safaricom has come to a place where they realize they don’t hold a monopoly on innovation, it will happen, they just need to get out of the way, take a cut, it contributes at least 4-6% of their total revenues.

Lets take look at Econet wireless.

Their story is an inspiration for Africa by many accounts having overcome the greatest of odds, from last entry in the market, to complete and utter dominance of the telecommunications sector in Zimbabwe. They are ruthlessly focused, efficient, and have managed to lead the sector in what I estimate this year will be billion dollar revenues.

Ecocash wallet has quickly acquired more customers than the total banked population in less than two years and their launch of service happens in a quick succession of 2-3 months for new products.

What about the market?

With no formal regulation of VAS/WASPA providers, it’s entirely up to the operator as to whom they choose to work with, how and when. No accurate processes to determine if and when they will take on new ventures, its more akin to lining up several suitors for one fat bride, there are always likely to be losers, never a level playing field. Not to be accused of ranting against Econet,  all operators work in this manner in Zimbabwe. Each has a preferred set or just one VAS player connected into their platform, reducing the likelihood of service deployments on unified shortcodes.

How many shortcodes for VAS ? Limited to News alerts, basic SMS subscriptions and operator dominated services. How many VAS players of note, less than 20. In fact the word aggregator, will get doors closed in your face.

How many microfinance institutions have mobile services ? your guess is as good as mine. How many manufacturers can deliver solutions for distribution within 2-3 months ? FMCG ? None. For a forward thinking market such as Zimbabwe why would top FMCG promotions run on WhatsApp! For banks the acquisition and roll-out of mobile banking solutions in the market has been painful, and often fragmented.

Econet will continue to dominate the market, that is not in doubt. In fact, we all want to be like Econet in a downturn economy like this. But will they deliver the level of innovation that this economy needs to break the downturn, not by a longshot. Innovation cannot be monopolized. If anything they should lead the call for a formalized VAS/WASP regulation, and open up the pipes. Not to be relegated into dumb pipes, but to participate in opening up opportunities that other business segments can build and grow on. Because their future depends on it.

They might read from the Safaricom script, but they are far from being a game changer for this market. The co-operative and collaborative model that impacts businesses and the economy at large does not exist.

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