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M-Shwari pushes up loan accounts by 1.7m in six months

 Latest Central Bank data shows rapid uptake of M-Shwari, the mobile-phone based account operated by Safaricom and CBA has boosted borrowing. Photo/Diana Ngila
Latest Central Bank data shows rapid uptake of M-Shwari, the mobile-phone based account operated by Safaricom and CBA has boosted borrowing. Photo/Diana Ngila 

Safaricom’s mobile phone-based bank account M-Shwari helped to push up the number of loan borrowers by 1.7 million in six months between January and June, latest data by the Central Bank of Kenya (CBK) shows.

This represented an 82 per cent jump in the number of bank loan accounts to an industry total of 3.8 million, compared to only about 95,000 new borrowers enlisted in the whole of 2012.

The jump has been attributed to the rapid uptake of M-Shwari, a mobile phone-based account launched jointly by the Commercial Bank of Africa (CBA) and telco firm Safaricom in November last year.

“As at June 30, 2013, the number of bank customer deposit and loan accounts stood at 18.9 million and 3.8 million, respectively,” said CBK in its annual report released last week.

M-Shwari allows Safaricom subscribers to open a bank account with CBA through their mobile phones, save money and borrow based on their M-Pesa usage records.

The Central Bank report indicated that the number of deposit accounts in the country had crossed the 20 million mark boosted also by M-Shwari, whose uptake has lifted CBA to Kenya’s second-largest retail lender after Equity Bank.

“The numbers keep growing. We have now crossed the five million mark and giving up to 30,000 loans a day,” CBA’s chief executive Jeremy Ngunze said in an interview late October.

CBA said that some of M-Shwari subscribers can now access loans of up to Sh8,000 based on their savings trends on their M-Pesa accounts.

Other lenders have also been looking for ways of tapping into Safaricom’s more than 20 million subscriber base with mobile phone based products.

KCB recently launched M-Benki through which it targets to open three million accounts in a year. Family Bank has said it is targeting five million new accounts in the next nine months with its PesaMob, which was introduced early this month. 

The mobile product allows users to deposit, transfer and borrow money between the automated teller machines and their phones without visiting the branch.

Linkage of mobile phones to bank accounts has enabled access to financial services and credit by low-income earners who have for a long time been excluded due to a lack of collateral and banking history.

“In July the lending to households surpassed loans to manufacturing, which shows banks are rolling out more loans to individuals,” said Standard Investment Bank’s Francis Mwangi.

Individuals ordinarily borrow small loans, which explains the rapid growth in the number of accounts without equivalent growth in size of the industry’s loan portfolio. Over the six months period the banks’ loan books expanded by 12.4 per cent to Sh1.45 trillion.

The Central Bank did not give data on the sectorial distribution of loan accounts, nor whether the short term bank overdrafts were included in the number of accounts. A recent survey by the World Bank showed that most people borrow to meet short-term cashflow needs and not for investment.

“Kenyan firms cite working capital shortages as the primary reason for approaching banks. The distribution of loans may also reflect banks’ assessment that long-term loans are too risky,” said World Bank in a report dubbed Reinvigorating Growth with a Dynamic Banking Sector.

Latest financial inclusion data shows that two thirds of the bankable population has access to formal services which include banks, saccos, deposit taking micro-finance and mobile products.