Safaricom and Commercial Bank of Africa launched an adults only product named M-Shwari this week and it immediately caused quite a stir in the market.
M-Shwari stormed the market instantly beating the Faulu Kenya and Airtel's Kopa Chapaa service through which subscribers access loans from Faulu microfinance. Safaricom had another partnership with Equity Bank that did not quite tick.
"We brought you M-Pesa, which single-handedly revolutionised how 15 million Kenyans move money around and now we are creating solutions to savings and credit," said Bob Collymore at the launch.
"M-Shwari is an innovative tool that enables people to save and borrow money using their mobile phones. We believe it provides savings power to the poor with access to affordable credit".
So what is M-Shwari service?
This is a paperless Commercial Bank of Africa banking service offered through M-Pesa. The difference with other bank accounts is that you can move money in and out of your M-Shwari savings account to your M-pesa account at no charge, save as little as Sh1 and earn interest on your saved balance.
There are no ledger fees, no limit on the frequency of withdrawals, no minimum operating balance and no charge on deposits from M-Pesa to M-Shwari account.
Interest paid on your savings balance will be calculated daily but paid out at the end of each calendar quarter, meaning after three months.
The rates vary with the amounts saved, where savings of between Sh1 and Sh10,000 will be two per cent, Sh10,001- 20,000 at three per cent, and Sh20,001 - 50,000 at four per cent while Sh50,001 will earn five per cent.
You can borrow loans of a minimum of Sh100 and maximum of Sh20,000 anytime through the phone and receive the money instantly on your M-Pesa account.
In order to qualify for a loan you will have to be an active M-Pesa user for at least six months, save regularly on M-Shwari account and continuously use other Safaricom services including voice, data and M-Pesa.
Here lies the catch. During the time you owe them the money, your M-shwari account will be frozen. The loan must be paid within 30 days together with the 7.5 per cent facilitation fee. They call it a facilitation fee and not interest on the loan.
If it is not paid it rolls over to another 30 days, where the customer will be required to pay the full amount and a total of 15 per cent facilitation fee.
Sixty days non-payment may cost the customer the Mshwari account and M-pesa account as well as risk being reported to the credit reference bureaus for blacklisting by all lending institutions.
Early repayment will increase your future loan limit qualification and to know how much you can borrow, dial *234*6#.
Before you gain credit access you must go through simplified steps to Mshwari account.
You go to the Safaricom menu on the phone, M-Pesa, go to 'My account", Select "Update Menu" enter M-Pesa PIN and when the updated menu appears, choose M-Shwari and click accept.
The standard M-Pesa limits apply except for depositing which starts from Sh1 in your M-Shwari savings account directly from M-pesa.
You can send money to Mshwari bank accounts as savings as many times as possible at no charge.