M-Shwari offers 6-month loans to smartphone buyers

What you need to know:

To be eligible for a loan, one must be a Safaricom and M-Shwari customer and will be required to deposit 30 per cent of the device purchase price to their M-Shwari savings account prior to being advanced the loan, and pay the balance within six months.
The minimum amount one can be advanced is Sh1,000 while the maximum is Sh50,000 for selected mobile devices.
Offering smartphones on loan seems to be in tandem with the telco’s wider strategy to increase data consumption.

Safaricom’s M-Shwari customers can now borrow loans to buy smartphones and tablets in the company’s bid to grow high-speed data devices connected to its network.

Safaricom has partnered with a number of handset manufacturers such as Huawei, Tecno, LG and Samsung to offer various mobile phones on credit at its outlets.

To be eligible for a loan, one must be a Safaricom and M-Shwari customer and will be required to deposit 30 per cent of the device purchase price to their M-Shwari savings account prior to being advanced the loan, and pay the balance within six months.

The minimum amount one can be advanced is Sh1,000 while the maximum is Sh50,000 for selected mobile devices.

“The smart loan shall be subject to a facility fee of 15.6 per cent but will be free from any loan-processing fees and interest charges during the term of the loan,” said Safaricom in a notice.

Defaulters are charged Sh200 for every overdue loan instalment. However, Safaricom says it has the right to discontinue a defaulter from calling or sending SMSes, using data services and obtaining Okoa Jahazi airtime, and ultimately disabling the device.

Safaricom has been investing heavily in data with its recent launch of a 4G network as it seeks to cut dependence on voice revenue. Offering smartphones on loan seems to be in tandem with the telco’s wider strategy to increase data consumption.

READ: Safaricom races ahead of rivals with 4G network

The telco spent Sh400 million to subsidise smartphones and tablets in the year ended March 2014 that increased its Internet subscribers to 3.1 million, boosting data sales.

Unlike feature phones that only access voice and SMS, smartphones enable a user to stream videos, send and receive pictures and other multimedia content and are key drivers of data usage.

Voice accounted for 60 per cent of Safaricom’s revenues in the year to March 2014 and the firm is racing to shore up its other business units, including SMS, M-Pesa and data.

During the period, Safaricom made Sh9.3 billion on mobile data up from Sh6.6 billion the previous year.

Other than stimulating data usage the firm also made Sh4.9 billion in the year from sale of handsets.

“By breaking the price barrier jointly with handset manufacturers, Safaricom has managed to grow the number of smartphones in our network to 3.1 million this year from just over 400,000 in 2012,” Safaricom said in its annual report.

The telco giant, which has 21 million subscribers, also said it has about 400,000 active modem users and 120,000 tablet users who consume data on the go.

“Affordable data led the number of mobile Facebook users in our network increased tenfold to the current 4.5 million users from 250,000 in 2010; and distinct data users now stand at 10.5 million from 2.64 million in 2010,” the report noted.

Safaricom expects a surge in demand for data services, thanks to an explosion of Internet-ready devices, especially mobile phones, apps and content.

Kenya has many low-end users who only make calls and send text messages, but a young and tech-savvy population is buying tablets and smartphones, increasing data usage.

Data has emerged as a fertile ground for mobile phone operators who have upgraded their networks to support high-speed wireless services.