12 December 2012

Kenya: Faulu Sues Safaricom Over Its New M-Shwari Banking

A micro-finance company has sued Kenya's leading mobile service operator, Safaricom over the continued use of the newly launched M-Shwari account.

Faulu Kenya Deposit Taking Microfinance Ltd has accused Safaricom of breaching of an existing contract by purporting to own the M-Shwari account and further offering the service to its customers. Safaricom in partnership with Commercial Bank of Africa launched the mobile banking service on November 27.

But Faulu in its court documents argues that it is already using the product in partnership with Airtel Networks Limited under the brand name 'Kopa Chapa' cash advance services, which has been approved for offering to the public as a money product by Central Bank of Kenya.

Faulu claims that on various dates in 2011, it developed a cash advance service which would be operated on the mobile telephony platform.

It's clients it says would be able to apply for, receive and make payments throughout the mobile phone network operated by a mobile phone service provider.

The microfinance company had proposed to Safaricom to partner with it in offering the same product on its mobile phone network through its M-Pesa money transfare platform. It presented a concept paper that incorporated the details and information on the cash advance product.

Faulu further executed a disclosure agreement with Safaricom to restrain either party from disclosing any information on its cash advance product and related information to any third party.

But following the new developments, Safaricom is now in breach of the terms of the non-disclosure agreement and in contravention of Faulu's trade secrets and copyright as it has already presented a similar product called M-Shwari and offered it to its customers, purporting it to be its own.

"Its imperative that this matter is of extreme urgency as Safaricom has already launched M-Shwari product and is currently engaged in extensive marketing and sensitisation of the product in complete disregard of Faulu's rights and in total breach of its confidence," it states.

Faulu is now seeks orders restraining Safaricom and its authorised dealers from offering to its subscribers and the public the M-Shawri service.

Commercial judge Jonathan Havelock certified the matter as urgent and directed parties appear before him on on Tuesday for inter-parties hearing.

"I can understand the urgency of the matter and bearing in mind that Safaricom has launched its product in completion to that of Faulu into the market as at the end of November. But I am not inclined to issue restraining orders until Safaricom has had an opportunity to put its side of the story," he said.

Safaricom according to the contract was only required to use the information only for the purpose of facilitating research in its M-Pesa service and not to disclose the same without Faulu's authority

Safaricom was also not required to use the information to compete or obtain any competitive or other advantage with respect to the disclosing party.

The M-Shwari product targets the over 15 million M-Pesa users, with the aim of interesting them in saving while at the same time offering them an opportunity to access credit services.

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