M-Shwari drives increase in bank accounts to 18m

A man makes a call next to an M-Shwari branded bus stage in Nairobi. FILE
A man makes a call next to an M-Shwari branded bus stage in Nairobi. M-Shwari and agency banking are among factors that have made it easy for Kenyans to access financial services at lower costs compared to traditional banking. FILE 

The introduction of M-Shwari and agency banking services helped to boost total bank accounts by two million to 17.6 million last year, a new report by the sector regulator has showed.

M-Shwari, a joint product of telco Safaricom and Commercial Bank of Africa, was introduced in November last year as a mobile-phone based application for saving cash and borrowing small, short-term loans.

Agency banking, which involves use of third parties to carry out bank transactions, started about two years ago.

“This growth is due (to) financial inclusion initiatives by CBK, introduction of M-Shwari accounts by Commercial Bank of Africa in conjunction with Safaricom, agency banking, aggressive marketing and stable macroeconomic environment,” said Kenya Financial Sector Stability Report 2012 released by the regulator this week.

Bank accounts increased by 13 per cent to 17.6 million as at December 2012, from 15.7 million in 2011.


M-Shwari’s introduction in the third quarter of last year was behind a big surge in the total number of bank accounts.

Between September and December 2012, deposit accounts increased five per cent to 17.6 million as per Central Bank of Kenya (CBK) figures.

Growth in the first, second and third quarter was at 1.4 per cent, 3.7 per cent and 1.6 per cent respectively.

Safaricom’s annual report for the year ended March 2013 showed there were 1.2 million M-Shwari users, but this number has since risen to “over three million” according to latest figures by the telecommunications firm.

The exponential growth has been driven by M-Shwari’s ease of use and relatively lower operating cost.

“It improves ease of savings at the lowest levels so it makes sense,” said Johnson Nderi, head of research at Suntra Investment Bank.

Analysts say that in addition to increasing the number of Kenyans with access to formal financial providers, commercial banks will greatly benefit from the ability to marshall small amounts of money at minimal cost by tapping huge amounts that circulate out of the mainstream system.

“Government statistics estimate that Sh200 billion is currently sitting outside the formal banking system. These funds belong to people who have no access to formal banking and struggle to access traditional banking,” said Safaricom’s 2012-2013 annual report.

The estimated Sh200 billion is about 12 per cent of the banking industry’s total deposits of Sh1.71 trillion held as at the end of 2012.

The Sh1.71 trillion was a 14.8 per cent increase, which the CBK says was due to branch expansion and receipts from exports.

Agency banking, according to the CBK report, was also a main catalyst for the increase in deposit accounts.

Latest data indicates that as at the end of March 2013, there were 18,082 active agents who had made more than 48.4 million transactions worth Sh250.1 billion since its introduction in 2010.

The CBK has since licensed 13 commercial banks to open agencies which are expected to increase the bank deposits due to their ability, like M-Shwari, to collect money at a reduced cost over brick and mortar outlets.

A coverage note on Equity Bank by Old Mutual Securities says that it costs banks a seventh of the average cost per transaction using agents compared to fully-fledged banks.

“In addition, the bank saves Sh82 per transaction with the use of agency model which is estimated to cost Sh14 per transaction compared Sh96 per branch transaction,” says the report.

The coverage note says that Equity Bank had 18,082 agents as at June 2013 through which went Sh10.9 in deposits and Sh4.8 billion in withdrawals.