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.
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.
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.
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