December 13, 2012 / 1:26 PM / 5 years ago

Safaricom faces court challenge over banking service

NAIROBI, Dec 13 (Reuters) - Kenya’s Safaricom Ltd is facing a lawsuit from a local micro finance firm over the telecom group’s revamped mobile phone banking service M-Shwari.

Faulu Kenya, an organisation that lends small amounts of money to consumers and small businesses who can’t borrow from banks, has launched a legal action accusing Safaricom of breaching its intellectual property rights with the launch of the service.

In its lawsuit, Faulu said it had taken a proposal for a similar offering to Safaricom a year ago, before deciding to start a service with the country’s second-biggest mobile operator, Bharti Airtel.

Safaricom hit back, saying M-Shwari was its proprietary product and adding it would seek a resolution of the case through the right legal processes.

“We believe that this lawsuit is tainted with malice because it is founded on untrue allegations,” it said in a statement on Thursday.

Financial products are an important area for Safaricom, whose mobile phone-based money transfer service M-Pesa accounted for revenue of 10.43 billion shillings ($121.5 million), or a sixth of the total, in the first half.

The M-Shwari service allows users to save and borrow from a local bank using their mobile phones and is a step-up from M-Pesa, which was launched in 2007.

Launched with Commercial Bank of Africa (CBA) late last month, M-Shwari has surpassed both firms’ expectations, having registered 600,000 users in the space of two weeks, Safaricom said. (Reporting by Duncan Miriri; Editing by David Holmes)

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