Kenyan mobile operator Safaricom will today face off in court with a microfinance institution that has sued the telco for alleged copyright infringement and breach of agreement in the development of the mobile money based credit scheme, M-Shwari.

The case to be heard today, before Justice Jonathan Havelock of the High Court, is set to be the first major intellectual property battle in Kenya.

Faulu Kenya filed a suit last week seeking to stop Safaricom from operating M-Shwari, arguing that it is similar to its Kopa Chapaa service which has been in operation since last year and is a partnership with Indian mobile operator Airtel Kenya.

The microfinance institution is also seeking award of general damages.

M-shwari, which was launched three weeks ago in partnership with British telecommunications group Vodafone and Commercial Bank of Africa (CBA) has since registered 645,000 users. The service has netted $1.7 million in savings and disbursed $580,000 in loans.

M-shwari allows users to save, earn interest and borrow loans using their mobile phones. Users can save as little as 1 shilling and borrow amounts from as little as $12 virtually via their mobile phones repayable within 30 days.

Faulu Kenya claims M-shwari was copied from Kopa Chapaa which allows users to borrow between $7 and $1,200 repayable within 10 days.

The microfinance institution further claims to have proposed a partnership with Safaricom to deploy a similar product two years ago. Faulu claims the two parties signed a nondisclosure agreement, restraining either party from disclosing information on the proposed service to a third party or using the information to gain competitive advantage over the other.

While Faulu Kenya says it developed its service in 2011, Safaricom claims it has been testing its product since 2010.

Safaricom has denied the allegations and maintains that M-Shwari is a banking product of the CBA and is authorised as such by the Central Bank of Kenya.

“While the allegations are lamentable and unfortunate, Safaricom will seek to resolve the matter through the right legal processes and we believe this lawsuit is tainted with malice because it is founded on untrue allegations.” said Safaricom in a statement.

In 2008, a Christopher Ondieki sued Safaricom claiming he developed the revolutionary mobile money transfer service, M-Pesa. Ondiek claimed in his suit to have forwarded a proposal to Safaricom about the technology and was invited to demonstrate his invention. However, instead of finalising the deal, Safaricom went ahead to implement it without his consent.

Last May, a Nairobi court declined an application by Safaricom to dismiss the case saying it was misconceived and an abuse of court process and referred the case to the Industrial Property Tribunal for determination.

The M-Pesa service is Safaricom's second biggest revenue stream after voice, contributing about 37% of the firms total revenues, according to half year results for the period ended 30 September 2012.