Safaricom takes on banks with its new micro loan product

SafaricomSafaricom is the second mobile operator to start offering loans using the cell phone in a move that is set to further upset the banking industry that is trying to recover its place that was lost to the mobile money revolution.

Safaricom, on Tuesday, launched a micro-loan product named M-Shwari, which will allow its 19 million users to save and borrow money from their mobile phones using the M-Pesa platform. The scheme is being partnered with the Commercial Bank of Africa, which will provide the banking services.

The service will permit even saving of as little as Sh1 and borrowing of a minimum of Sh100, with interest rates ranging from two to five per cent per year, depending on the subscriber’s savings. But, borrowers will have to pay a one-time facilitation fee of 7.5 per cent of the borrowed amount. Subscribers can borrow up to Sh. 20,000, repayable in 30 days.

Safaricom joins Airtel which in May launched a similar product, though on a smaller scale, through a partnership with the micro lender Faulu Kenya.

Airtel’s service, which is known as Kopa Chapaa, allows subscribers to avail loans between Sh100 and Sh10,000 at an interest of 3-10 per cent.

Speaking at the launch of the scheme, Safaricom CEO Bob Collymore said that the product would enable low-income earners to avail affordable loans based on their savings. These services are sure to bring about competition in the short-term lending market that has been dominated by ‘shylocks’.

But, the banks have downplayed the entry of mobile operators in the lending industry stating that they are targeting the unbanked population.

In an e-mail interview, Habil Olaka, the Chief Executive Officer, Kenya Bankers Association said that product innovation in mobile banking would be a differentiating factor for the mobile sector as banks would be increasing accessibility to financial services. People can expect more linkages with various telecom providers on the same lines of the Commercial Bank of Africa and Safaricom on the M-Shwari product.

Anyone who would like to activate the M-Shwari account, will have to go to the M-Pesa menu, select the account option, choose the update menu option and then enter their M-Pesa PIN number. The M-Shwari will automatically be included in the M-Pesa menu.

Mr. Collymore said that it was absolutely simple as it did not involve any ledger fees, limits on the frequency of withdrawals, minimum operating balances and further there were no charges on deposits for M-Pesa to M-Shwari account.

Mr Stephen Nduati, head of National Payments System said that loan defaulters will be blacklisted and will not be allowed to borrow for five years.

M-Shwari creates a platform on which customers can save at their desired pace and convenience. Mr Michael Joseph, Director of Mobile Money, Vodafone said that it makes a safe environment for customers to borrow small amounts and links the amounts of credit available to the ability to save.

Mr Francis Wangusi, the Director General, Communications Commission of Kenya, said that this was one of the reasons the CCK was aggressive to phase out the counterfeit phones.

In an attempt to ward off fraudsters, the ministry of immigration will make available details of every Kenyan though the IPRS database so that Safaricom and the bank can confirm that the person applying for the loan matches the details in the system. The Immigration minister Mr Otieno Kajwang said that they were working in tandem with the companies so that customers are not troubled by frauds.

Image courtesy: FreeDigitalPhotos.net

Leave a Comment

Your email address will not be published.

You may also like

Growing a Business

Want Great Guidance ? Find yourself a Super Mentor


They are the gods of small businesses, those inspired individuals who have achieved the highest levels of success. They can be the shining beacons who light up the path of running your business with their vision, wisdom and wealth of resources and contacts. They are The Mentors.

If you are fired with the passion to take your business to great heights, the best thing to do is find yourself a super mentor. Here are some tips to help in your quest

Pinpoint your Need

Sit down and focus your thoughts on your business growth strategy. Which area of the business needs a lift. Is is staffing, is it the finances, is it the production, is it the your lack of customers or is it the business as a whole that needs a makeover. Once you’ve zoomed in on the sore spot, this is where you need…

Read More
Growing a Business

Dreaming Big? You can Move Mountains with these Business Productivty Tips


You may be full of admiration for some people who seem to manage themselves and their work so usefully and efficiently. They seem to fit in so much productive work into the same number of hours which everyone has.. Let’s look what makes them tick and take a few tips.

Learn to identify your most productive hours

Its true, most productive people know which time of the day they can be most creative and efficient. They identify and allot these hours for the best part of their work. This way they are able to give their 100% awareness to the job and business productivity.

Early to rise- A winning habit

Waking up early is a personal habit that has all the plusses on its side. You need not necessarily go to work that early. It’s a habit that gives you more time for personal care, like mediation, exercise, walking,…

Read More
Growing a Business

Leadership Qualities that can make you an Icon


You may have reached the leadership position through sheer dedication to performance and a do or die attitude . Now that you are at the top, your viewpoint needs to change. You have to now be a role model, one whom others will look up to and follow. Here are some tips that can shape your leadership and management skills

Be Competent: Employees will look up to a leader who has good industry knowledge and management skills. If you do not possess these skills you should surround yourself with knowledgeable people who can offer good counsel. Competence is a trait all employees will admire.

Be Trustworthy: No one will look up to a person they cannot trust. Your employees will want to rely on you and count on you. In difficult situations, leaders are expected to apprise their employees of the situations and find solutions on how to address…

Read More
Raising Money

Are You offering Your Services Using the Right Pricing Strategies?


In these times of fierce competition, business people , mostly those that offer services and belong to the service based industry, are finding it a challenge to implement the right pricing strategies. It is virtually a struggle to set the right business price that will retain and attract the customers, and not drive them away. Follow these tips, the crucial dos and don’t s and you may be in a much better position to offer your services at the best price.

Maintain your Business identity and Dignity

If you are offering a unique or special product or service, don’t underrate it just because you want to build a better relationship with the customer. This will just cheapen your offering as another run of the mill. If its something special you are offering the customer, then communicate this fact to the client and get the equation right with the most…

Read More
Raising Money

What is a Fair Wage? How Do you Assess Fair Wage?


How do you figure out a fair wage?

This is a very common question for startups and small businesses. They can’t seem to decide or understand how to set wages and manage reputations at a time. They are determined to pay well but they also have to think about encouraging their employees to stay with them for a long time. This is why there is a need to think strategically.

Listed below are a few expert tips to help you decide:

Don’t Focus Only on Money

Money should never be the main focus for you or for your employees. You should decide on the wages in such a way that your employees are tied to your business. When your business does well they should be able to taste that success and vice versa.

Also, think about additional perks such as exclusive benefits and time off. Many employees value this more than the overall…

Read More
Raising Money

Tips to Winning Hard Negotiations With Ease


While some negotiations are easy, others are quite hard to win. If you stumble you will lose.

Whether it is a potential client or an investor, negotiations can be very tough and frustrating. The problem is that the moment you let your frustration overwhelm you, you will lose the deal and you will give in to whatever is being offered to you. In order to avoid that, here are tips to overcome tough times and to win even the hard negotiations:


Know your opponent as well as possible. This is the rule no matter what you do. You should understand your opponent to the T. Who the person is, what his culture is, what he thinks, what he stands for, how is his network, etc. are the questions you should ask yourself and answer through research before meeting up for the negotiation. Understanding the opponent will give you a great advantage.


Read More