NAIROBI, KENYA: Central Bank of Kenya (CBK) has endorsed a mobile loan product by five commercial banks targeting micro, small and medium scale enterprises
The mobile-based credit scheme is set to improve access to credit for small-to-midsize enterprises, which have been locked out of the formal credit market because of the informal nature of their records and lack of collateral for secured loans.
The loan product, marketed under the name Stawi, will initially be managed by five banks – Commercial Bank of Africa Limited (CBA), the Cooperative Bank of Kenya Limited, Diamond Trust Bank Kenya Limited (DTB), KCB Bank (Kenya) Limited, and NIC Group PLC.
Customers will access the loan through a mobile phone application. The money will then be credited to the customer wallet. Stawi offers unsecured loan products ranging from Sh30,000 up to Sh250,000 with repayment profiles of 1-12 months, at an interest of nine per cent per annum with other costs pushing it higher.
According to flyer answering what are likely to be the most frequently asked questions about the loans, "The interest charges will be at 9 per cent per annum. The other charges to be collected upon disbursement will be facility fees of 4 per cent, insurance fees of 0.7per cent of the disbursed and excise duty which is 20per cent of the facility fee."
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Customers will be scored and advised of their credit limit. Additionally, they are eligible for a top-up functionality once 80 per cent of the loan borrowed has been repaid or record of accomplishment of three months’ repayment.
Speaking during the launch at Gikomba Market, CBK Governor Dr. Patrick Njoroge said that the facility responds to the unique financing needs of MSMEs. He also emphasised that the sector is vital to the Kenyan economy.
“Until now, lending to MSMEs has been constrained by the lack of reliable information to assess their creditworthiness. The innovation in this product is the use of all data on customers' transactions to fill this gap. In that sense it is revolutionary,” he said.
The governor added that the cooperation between the five banks would allow them to reach out to a growing number of small enterprises, promoting job creation and income generation, with a multiplier effect on the economy.
The pilot phase will be two weeks and will involve 3,500 traders in the MSME sector. The second roll-out will be to 10,000 traders, who will be registered by Stawi agents and will be involved in the second round of tests for the app.
"We saw an opportunity to offer neglected yet viable Kenyan-based business additional financing options to continue day-to-day operations, and provide additional capital to maintain and establish long term growth,” said KCB Group CEO Joshua Oigara.
“Partnering with the other banks has allowed us to bring a new business line to market while offering the necessary expertise and scalability to meet growing customer demand and strengthening MSME contribution to productivity and inclusive growth.”
Gideon Muriuki, CEO of Cooperative Bank, said: “This is the first time we are having a loan with a single-digit interest rate and we hope that in the next phase, we will have all banks on board.”
John Gachora, the CEO of NIC Bank, said the banks rallied together after the CBK Governor asked for a way for them to fund SMEs.
“The Governor told us not to come here without a solution for you and we believe this one here will work for you,” Mr Gachora told traders at Gikomba Market.
Diamond Trust Bank CEO Nasim Devji said the product would come in handy for the thousands of traders who do not operate bank accounts but need access to loans at friendly rates to expand their businesses.
“We looked at a way to fill that gap and that’s how the five of us got together to come up with Stawi. We welcome traders to take this up and to talk to us as we work to see that their financial challenges are eliminated,” said Ms Devji.
Jeremy Ngunze, the CEO of CBA, said they had established through research that the market is ready for the product.
“There are thousands of people who have bank accounts but we also know that there are many without. We believe that we have come up with a unique product that will be useful for a lot of those in business that will be accessible without having to go through a complex application process,” said Mr Ngunze
