Markets & Finance

M-Shwari lending more than triples to Sh24bn in one year


Mr Jeremy Ngunze, the Commercial Bank of Africa Kenya CEO. PHOTO | DIANA NGILA

M-Shwari loans grew by over three times in the past year, underlining the vast potential of mobile banking in the country.

Commercial Bank of Africa (CBA), which runs the platform in partnership with Safaricom, said loans amounting to Sh24 billion had been borrowed through M-Shwari up from Sh7 billion in February last year.

“We have so far disbursed loans amounting to Sh24 billion, while maintaining a repayment rate of 97 per cent which is by far more impressive than the repayment rates for loans advanced by commercial banks,” said Jeremy Ngunze, CEO CBA Kenya.

M-Shwari has attracted over nine million customers in the two years it has been operational, who have registered deposits in excess of Sh135 billion, added Mr Ngunze.

Loans are offered at a flat rate of 7.5 per cent and are repayable within a month.

To enforce repayment, the bank has been forwarding names of defaulters to credit reference bureaus. CBA also said that it was using historical behaviour of users to sift out bad borrowers and improve its loan book quality.

The lender had promised to review the cost of the loan after learning customer repayment behaviour. Uptake of the mobile platform product has helped CBA, which is associated with the Kenyatta Family, to leap-frog other lenders in the retail banking segment.

READ: M-Shwari lifts CBA above Equity in loan accounts

A deposit base of Sh135 billion places it in the category of large banks and a loan book of Sh24 billion is equivalent to that of a medium-sized lender.

Last year, M-Shwari started offering interest to customers who locked their savings with the platform for specified periods which has been a key driver of its deposit base.

The lender is banking on the recently launched Smart Loan product to grow its loan book.

Safaricom said that it has sold 6,500 mobile phones in the last one month under the Smart Loan product which allows subscribers to purchase smart devises through monthly instalments.

Under the scheme, customers pay 30 per cent of the cost of the device upfront and settle the balance in instalments of up to six months.

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

The loan is subject to a facility fee of 15.6 per cent but is free from loan-processing fees and interest charges.

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