Kenyan investment bank Genghis Capital has accused telecommunications giant Safaricom of "business fraud" over the launch of a competing money market fund, Ziidi, which was approved by the Capital Markets Authority (CMA) on November 27, 2024. The dispute centers on Safaricom's alleged decision to stall the rollout of Mali, a fund launched in partnership with Genghis in 2020, and instead register the rival Ziidi product.

In a letter seen by TechCabal, Genghis Capital claims that Safaricom breached an agreement and violated the spirit of their 2019 partnership. The bank asserts that Safaricom delayed the launch of Mali while working with other third parties to register Ziidi, which amounts to "business fraud."

Safaricom has defended its actions, citing technical issues with the Mali platform. In a response dated December 6, the telco stated that a larger fund with these challenges would not only expose Safaricom to reputational risks but also potentially result in adverse regulatory and legal action for both Safaricom and Genghis.

In addition to the allegations of business fraud, Genghis Capital has also accused Safaricom of breaching privacy laws. The bank claims that the telco has been migrating customers from Mali to Ziidi through the M-Pesa app without their consent, a breach of data protection regulations.

The dispute highlights the growing competition in Kenya's wealth management and digital finance sectors as the telco seeks to expand its investment offerings through M-Pesa. In September 2024, the CMA ranked Mali as the seventeenth-largest collective investment scheme in Kenya, with assets totaling $23.9 million (KES3.1 billion). The fund generated $89,748 (KES11.6 million) in revenue for Safaricom in the first half of 2024.

The allegations of business fraud and privacy law violations have significant implications for the digital finance sector in Kenya. As the competition for market share intensifies, it remains to be seen how this dispute will be resolved and what impact it will have on the industry as a whole.

The dispute also raises questions about the role of regulatory bodies in ensuring fair competition and protecting consumer rights. The CMA's approval of Ziidi has been called into question, and it is unclear what steps the regulator will take to address the allegations of business fraud and privacy law violations.

As the situation unfolds, it is clear that the dispute between Genghis Capital and Safaricom has far-reaching implications for the digital finance sector in Kenya. The outcome of this dispute will likely set a precedent for future partnerships and competitions in the industry.