M-Shwari leads Mobile lending industry

Safaricom Ag. CBU Director (Consumer Business Unit), Charles Wanjohi, with, Safaricom HOD- Nairobi East, James Maitai. [Standard]

Everyday brings forth new evidence of the growth and reach of modern day fintech and the transformative effects of universal access to credit.

The latest comes from a new study from marketing research firm Consumer Insight that paints a startling picture of the adoption of mobile money transfer and lending in the country.

Mobile loans have become the largest source of lending for Kenyan consumers outside family and friends. According to the study released in May, four out of ten Kenyans rely on mobile loans for credit. This is against one out of ten Kenyans taking bank loans.

“Mobile loans are steadily upsetting soft credit and are now the second most preferred avenue at 38 per cent, in sharp contrast with 10 per cent for bank loans,” says Consumer Insight in the study in part.

Friends and family lead with 49 per cent of Kenyans listing it their first source of loans and just 2 percent resorting to shylocks. This is a great departure from the past where banks delivered the bulk of the country’s credit needs and the unbanked forced to rely on shylocks who often charged upwards of 35percent.

The findings also mirror the rising trend of mobile loan facilities in the country where a big portion of the population is classified as low-income underscoring the importance of fintechs in poverty reduction.

Today, the market has seen a dynamic evolution of products and offerings from a growing list of service providers from both the local and international market.

The latest edition of the household demographic survey from the Kenya National Bureau of Statistics (KNBS) indicates that mobile loans are the third most important source of formal loans for Kenyans behind commercial banks and Savings and Credit Cooperative Societies (SACCOs).

Mobile loans appeal to many due to the lack of security required and the convenience attached where funds are disbursed to users within minutes in many instances.

At the same time, mobile loan facilities often rely on mobile money transactions in determining the ceiling for respective borrowers, allowing frequent users a stronger role in determining how much they can obtain.

Safaricom’s M-Pesa by far leads the industry in the number of registered customers as well as the number and volume of transactions made through the mobile lending products M-Shwari and KCB M-Pesa.

Through these trailblazing products, customers can deposit as little as sh1 and borrow loans starting from sh50 all the way to sh1million. There are no requirements for application forms, ledger fees nor charges for moving money between M-Pesa to bank accounts and vice versa.

At the same time, consumers are not required to have a minimum operating balance and there is no limit on the frequency of withdrawals. This has seen more subscribers gain access to banking services previously inaccessible.  

At the moment, Safaricom counts more than 10 million customers borrowing tens of millions of shillings each day to meet their pressing financing needs. To-date the service has disbursed more than sh230 billion in loans with the average amount per customer at Sh3, 300.

To mark its fifth anniversary M-Shwari earlier this year integrated the platform into the MySafaricom app.

The service now provides consumers a seamless user-experience that allows users to access their records and transaction history from one simple dashboard. In addition to this, the app is able to track payments and reward users who make repayments on time or ahead of time with better terms in subsequent loans.