The mobile firm on Tuesdaylaunched a micro-loan product dubbed M-Shwari,which will allow its 19 million subscribers to save and borrow money from their mobile phones using the M-Pesa platform.
It is being run in partnership with Commercial Bank of Africa, which will provide the banking services.
The service will allow saving of as little as Sh1 andborrowing of a minimum Sh100, with interest rates ranging from two to five per cent per year, depending on one’s savings.
Borrowers will also part with a one-off facilitation fee of 7.5 per cent of the borrowed amount. Subscribers can borrow up to Sh20,000, payable in 30 days.
Safaricom joins Airtel which in May launched a similar product, though on a smaller scale, through a partnership with micro lender Faulu Kenya.
Airtel’s service, known as Kopa Chapaa, allows subscribers to get loans of between Sh100 and Sh10,000 charged at an interest of 3-10 per cent.
Speaking at the launch, Safaricom CEO Bob Collymore said that the product would enable low-income earners access affordable loans based on their savings.
These services are promising to bring competition in the short term lending market that has been dominated by shylocks.
Banks have, however, downplayed the entry of mobile operators in the lending industry on grounds that they are targeting the unbanked population.
“Product innovation, particularly in the mobile banking space, will continue to be a differentiating factor for thesector as banks move to increase accessibility to financial services. You therefore would expect to see more linkages with various telecom providers, as we have seen with Commercial Bank of Africa and Safaricom on the M-Shwari product,” Kenya Bankers Association boss Habil Olaka said in an emailinterview.
To activate the M-Shwari account, one will be required to go to the M-pesa menu, select the account option, choose the update menu option and then enter their M-pesa PIN number.
An M-Shwari will automatically be included in the M-pesa menu.
“It is simple. There are no ledger fees, no limits on thefrequency of withdrawals, no minimum operating balance and no charges on deposits for M-Pesa to M-Shwari account,” said Mr Collymore.
“Loan defaulters will be blacklisted and will not be allowed to borrow for five years,” said the head of National Payments System, Mr Stephen Nduati.
Preferred pace
M-Shwari creates a platformon which customers can save at their preferred pace.
“It creates a safe environment for customers to borrow small amounts and links the amounts of credit available to the ability to save,” Vodafone director of Mobile Money, Mr Michael Joseph said.
