Mercy Biyaki, a farmer, frequently borrows money from KCB M-Pesa and M-Shwari to service her farm. She is among micro-borrowers who benefit from millions disbursed annually by the KCB and Commercial Bank of Africa (CBA) through M-Pesa, driving the surge in uptake of mobile money loans.
“I did not have an account with KCB but I enrolled by dialing *844# and followed the instructions,” said Ms Biyaki, “I started by borrowing a small amount at Sh500 but due to frequent use of the service I now borrow up to Sh19,000 which helped me buy seeds for planting.”
To benefit from the loans, users are required to be at least 18 years old, and registered active M-Pesa subscribers for at least six months before application.
The bank then requests Safaricom for the user’s personal information which is used to determine whether to give out the loan, and the limit of the loan that can be disbursed. M-Shwari also applies the same principles for an account holder.
“It is very easy to borrow through mobile money because you just dial the numbers on your phone and get an instant loan, without having to go to the bank,” said Ms Biyaki.
Mobile banking is now transforming the uptake of loans with KCB-M-Pesa disbursing Sh7.8 billion since its launch last year March, significantly deepening financial inclusion in the country.
The bank said that at least 5.2 million accounts to date have been opened through KCB M-Pesa; the accounts disburse an average Sh660 million loans monthly.
KCB chief executive officer Joshua Oigara said in a statement that the platform has eased lending and borrowing through instant disbursements. It has also cut out the need for collateral and bureaucratic processes that discourage borrowing.
The platform offers loans of between Sh50 and Sh1 million payable over a period of one to six months.
“Accessing affordable credit has never been easier and faster than it is today because of this mobile phone technology allowing customers to borrow instantly. A year after we launched this product, we firmly stand at the epicenter of transforming the financial services sector in East Africa and beyond,” said Mr Oigara in an earlier interview.
CBA’s M-Shwari is also very impactful having disbursed Sh24 billion between its 2013 launch and early last year. The platform has over nine million customers.
While Ms Biyaki is a micro-borrower, Mr Lawrence Thuo, a technician borrows at most Sh100, 000 through the platform.
“When they launched the product last year I saw it on TV then subscribed and was given a loan. The nature of my business is that it needs ready cash flow so it [platform] has been my constant source of cash,” said Mr Thuo.
He narrated how mobile money loans have led to the growth of his business.
“Whenever I go looking for e-waste, I have to part with an amount for the waste and sometimes it turns out that I do not have ready cash.”
Mr Thuo added that in most cases, he just borrows from KCB M-Pesa or M-Shwari to purchase the electronic waste.
“Initially I could borrow from friends, shylocks and at some point it was too much to always ask money and expect it immediately,” said Mr Thuo, “ Mobile money has been very helpful. First I borrowed Sh7, 000.”
That Safaricom generates records of M-Pesa use, Mr Thuo said has helped ease borrowing.
“If you frequently transact big amounts on M-Pesa, then that is what is used to set your borrowing limit, as one continues borrowing, the amount then grows,” said Mr Thuo adding, “I borrow up to even Sh100, 000 and pay back the amount on a monthly basis to attract more money when in need.”
David Ngugi, a Nakuru businessman also borrows frequently from KCB M-Pesa to sustain his business.
“I like their accessibility and ease in processing of loans. It is very fast. In my very first attempt last year, I applied and they set a limit and immediately released Sh50, 000 which I was able to pay back after a month.”
“I use the money to run my manufacturing factory ‘Lillies Food’ in Nakuru, and I am used to borrowing from both M-Shwari and KCB M-Pesa,”said Mr Ngugi.
Financial Sector Deepening Report (FSD Kenya) 2016, shows that 18 per cent of the population now use mobile banking platforms to access their bank accounts.
This has raised the number of people actively checkingin on their bank accounts by 38 per cent, a 10 per cent increase since 2013. This figures indicate the impact that mobile banking has on financial inclusion.
Borrowers are also actively using Equity Bank’s Equitel which has been in the market since last year.
Equitel announced on Tuesday that 81 per cent of loan applications came through the mobile platform, translating to a transaction value of Sh333.5 billion in quarter one of 2016 from the Equitel mobile banking platform.