In a significant development for the digital financial services sector, the Competition Authority of Kenya (CAK) has granted unconditional approval for the acquisition of 100 percent shares in Kopo Kopo Inc. by Moniepoint Inc.

The decision was made after a thorough merger analysis by the authority, which concluded that the acquisition would not have negative implications on competition in the digital credit market and would not raise any public interest concerns.

Moniepoint Inc., an American-based company with subsidiaries in Nigeria and the United Kingdom, sought approval to acquire Kopo Kopo Inc., a fellow American company operating in Kenya under the brand Kopo Kopo Inc. (Kenya Branch).

The company provides digital financial services, including unsecured short-term loan facilities to small and medium-sized enterprises in Kenya.

The proposed transaction, which qualified as a merger under the Competition Act, No. 12 of 2010, required the approval of the CAK due to the combined turnover of the merging parties exceeding Sh1 Billion.

The merger analysis undertaken by the authority focused on two key considerations: the potential impact on competition in the digital credit market and any negative public interest concerns.

“The digital credit market in Kenya has witnessed substantial growth in recent years, with mobile-based banking and lending platforms playing a pivotal role in providing access to financial services,” CAK noted.

According to a study by Geopoll, digital lending has contributed to increasing financial inclusion by over 50% in Kenya.

The Central Bank of Kenya (CBK) has licensed numerous Digital Credit Providers (DCPs) to operate in the country since 2021.

The Competition Authority of Kenya’s analysis revealed that the acquisition would not substantially alter the competitive landscape of the digital credit market.

“Despite the acquisition, the combined market share of the merging parties would remain modest, with the target entity holding a 4% market share among licensed DCPs. The dominant players in the market include M-Shwari, Fuliza, and KCB-MPESA,” as outlined in the Authority’s 2021 Digital Credit Market Inquiry Report.

Additionally, the CAK considered public interest considerations, which encompass factors such as employment opportunities, impact on small and medium-sized enterprises (SMEs), and effects on specific industries or sectors.

“In this case, the acquisition was found to be favourable for employment, as the target’s existing employees would retain their positions, and the acquirer planned to create new jobs through a network of distribution associates.”

As a result of these findings, the Competition Authority of Kenya approved the acquisition of 100% shares in Kopo Kopo Inc. by Moniepoint Inc. without imposing any conditions.

The decision is expected to foster healthy competition in the digital credit market while addressing any potential public interest concerns.