The appointment of Safaricom to drive the Kenyan government’s fertiliser subsidy programme has opened yet another front in the turf wars between the telco and its erstwhile partner Equity Bank.

Under the scheme, farmers will receive electronic vouchers on their mobile handsets to be redeemed at appointed stockists for discounts on prices. Presently, subsidised fertiliser is distributed through the National Cereals and Produce Board of Kenya, but hardly reaches the intended beneficiaries due to corruption.

The two financial service providers fell out in 2007 over the sharing of profits in M-Kesho — the first mobile phone banking application in Kenya — and have been competing aggressively ever since.

The fertiliser subsidy programme came in the week that Equity Bank received approval from the High Court to go ahead with its thin Sim technology, an interface that will see the bank provide mobile phone services and money transfer services.

The fertiliser subsidy distribution system will benefit “over 3.5 million smallholder farmers across the country,” according to Sicily Kariuki, the Principal Secretary for Agriculture.

Agriculture contributes a quarter of Kenya’s GDP and the country has an estimated population of about five million smallholder farmers. Agriculture is the livelihood for most of these farmers.

This means that the fertiliser subsidy project could help Safaricom lock in close to five million clients on its network. For farmers to enjoy the subsidy, they must have the voucher entitling them to a discount. These vouchers will be distributed through the Safaricom mobile phone network.

Safaricom has cautioned most of its clients against the use of the overlay Sim technology set for rollout by Equity Bank after a drawn-out legal tussle and successful pilot, saying it comes with the risk of data breach.

The thin Sim technology eliminates the need for a user to buy another phone by enabling the sticker Sim to be placed over the existing one.

This enables handset owners to make and receive calls from the Equity Bank mobile phone service while enjoying other value added services that the bank will offer through the line. Of note is that the lines will ride on the Airtel network, Safaricom’s nearest rival in the Kenyan market.

READ: Equity-Airtel deal steals Safaricom’s thunder with money-transfer platform

“We already have 800,000 accounts and I’m optimistic we’ll have five million Sim cards issued by year end,” James Mwangi, chief executive officer of parent Equity Group Holdings, said during an interview at the World Economic Forum on Africa in Cape Town.

Equity Bank started out as a building society with the primary focus of helping farmers — at the time in central Kenya — to save and access financial services. It is from this wide base of farmers that Equity Bank has built its business.

And as the bank launches its mobile phone service, reportedly at a cheaper calling rate and also than Safaricom’s, it would want to retain the farmers — some of whom have stayed with the bank for decades — on its network.

After the divorce with Equity Bank seven years ago, Safaricom has been deepening its partnership with other banks without entering into exclusive agreements as was the case with M-Kesho.

Safaricom partnered with Commercial Bank of Africa (CBA) to launch M-Shwari in 2012, a mobile based banking product that is quite similar to M-Kesho. CBA has since reported that its customer base has grown to 10 million, the same as Equity’s current client base, 5.8 million of them active.

READ: Safaricom, CBA launch mobile phone fixed deposit account

The Lipa na M-Pesa service, which enables merchants to receive payments safely for goods and services also targets banking hall transactions from which banks like Equity draw non-interest income. It would, therefore, make business sense for Equity to unveil a cashless merchant payment system to rival Lipa na M-Pesa among the value added services that the thin Sim technology will bring.

The buy goods and services platform boasted more than 49,000 active vendors as of March this year who receive Ksh11.6 billion ($117.8 million) per month on average.

KCB launched the KCB M-Pesa service this year, a product similar to M-Shwari, which now has 1.4 million users in partnership with the telco. This coalition is of import since KCB and Equity Bank are fighting across East Africa for the crown of which is the biggest bank both in size and profitability.

READ: KCB Group to expand mobile banking services

In the first quarter of this year KCB reported a net profit of Ksh4.4 billion ($44.7 million) surpassing Equity Bank’s Ksh4.3 billion ($43.68 million) reported in the same period.

Equity Bank had led the way in the full year results for 2014 posting a Ksh17.15 billion ($174.2 million) net profit higher than KCB’s Ksh16.8 billion ($170.7 million)

Equity and Safaricom are also fighting it out for turf in the transport sector, where they have separately launched pre-paid fare cards.

In the education sector Safaricom Foundation recently broke the ground for its M-Pesa Academy in Thika, responding to the introduction by the Equity Bank Foundation of Wings to Fly, which gives scholarships annually to thousands of students for study in Ivy League American universities.

KCB Foundation boasts a similar initiative. These may seem altruistic moves but the end goal is to tap into the future generation by introducing them to these brands early in their lives.

The genesis of the aggressive rivalry between the mobile phone services provider and the bank can be traced back several years. In 2001, Safaricom and Equity Bank had the same number of customers — 100,000.

Both had mastered the art of making money off the common man. Unlike their rivals in each of their respective industries, Safaricom and Equity Bank packaged their products to fulfill the needs of the common man.

Safaricom billed its customers for every second they spent talking unlike Kencell, which billed per minute. Equity Bank introduced a banking model where customers could operate with no minimum balance prompting a mass walk out of customers from multinational banks.

A marriage between Safaricom and Equity Bank made sense in 2007 when they came together to introduce the mobile phone based banking application, M-Kesho. But the marriage lasted only a few months. Equity Bank wanted a larger share of profits because of its large outlet, something which Safaricom was unwilling to give into.

Spillover effect

The business rivalry helped by the convergence of telecoms and financial services, has spurred innovation in Kenya that is just starting to spill over into East Africa and the Great Lakes region.

Equity has shown its interest in regional expansion with the acquisition of 79 per cent of ProCredit Bank in DRC while Safaricom, in partnership with Vodacom, has made its M-Pesa mobile payments solution available in Tanzania.

Equity says it wants to venture into six other regional markets while Safaricom has indicated that partnerships such as that with Vodacom will be replicated in other EAC countries soon under the One Network Area initiative launched by East African heads of state last October.