A Double-Edged Sword for Investors.

Safaricom's Transition from Cheques to Electronic Dividend Payments.

18th March, 2024.

One of the biggest telecom companies in East Africa, Safaricom, has undergone a dramatic change with the intention of improving efficiency and simplifying shareholder dividend payments. For all dividend payments, the corporation has chosen to use electronic channels like M-Pesa and bank transfers rather than traditional cheque payments. Convenience and speed are promised by this change, but it also brings up important issues regarding the effects on investors and the overall investing environment.

The telco requested its shareholders to update their contact information with Image Registrars Ltd., its share registrar, and to indicate their preferred electronic payment method in a notice to shareholders. The motivation for this change comes from Safaricom's desire to find a more effective way to interact with investors and pay dividends on time. Safaricom wants to ensure a smooth dividend payout process by doing away with the delays that come with processing checks through the adoption of electronic payment options.

However, there are benefits as well as drawbacks to this shift to electronic dividend payments for investors and stockholders alike. Positively, electronic payments are incredibly quick and convenient, saving shareholders the trouble of physically collecting and clearing checks and enabling them to get their dividends on time. Furthermore, there is less chance of payment problems or inconsistencies with electronic transactions because they offer increased traceability and transparency.

While efficiency is appealing, shareholders need to consider the possible consequences of this change. The price of electronic payment services is one important issue. Dividend checks usually have little to no clearing fees, however there are transaction fees associated with electronic fund transfers (EFTs), real-time gross settlement (RTGS), and M-Pesa withdrawals.

In addition, some shareholder categories may find it difficult to utilize Safaricom's decision to stop accepting checks, especially if they don't have much access to online banking or are not accustomed with digital payment methods. Dividend payments may be delayed or missing if elderly or less tech-savvy shareholders face obstacles while switching to electronic payment methods.

Given these factors, Safaricom needs to make sure that shareholders have enough help and direction when they switch to electronic dividend payments. The business should provide all-inclusive support for maintaining shareholder data and enabling the smooth implementation of electronic payment options. Safaricom should also look into ways to lessen the financial strain on shareholders, including as working with banks to get better terms on transactions or covering the expenses of transactions for specific shareholder groups.

Safaricom's choice to switch from cheques to electronic dividend payments is a critical turning point in the company's pursuit of stakeholder involvement and operational efficiency. Although there is no denying the speed and convenience of electronic payments, there are drawbacks in terms of cost and accessibility. Safaricom has to put shareholder welfare first and make sure that all investors have fair access to dividend payments while it makes this transformation. In addition, investors need to be on the lookout for changing payment dynamics in the digital era and modify their investing plans accordingly.