Nairobi — A little over two months since launching M-Shwari, Safaricom says the mobile microcredit service has performed better than expected, with billions of shillings deposited and loaned out to help small and emerging businesses.
Safaricom launched M-Shwari in November in partnership with the Commercial Bank of Africa to provide savings and loan services to the 15 million users registered for its M-PESA service, which allows Kenyans to transfer money via text messaging.
By the end of December, M-Shwari had received more than 976 million shillings ($11.3 million) in deposits, and its customers had borrowed 123 million shillings ($1.4 million), according to Safaricom.
"The uptake for the product has been overwhelming and beyond our expectations," Safaricom CEO Bob Collymore told Sabahi. "Surprisingly, youths 25 to 30 lead those who have shown confidence with the service, by [opening accounts] and taking loans."
With M-Shwari, customers can open savings accounts with as little as one shilling and the service offers interest rates of up to 5% per year on savings, Collymore said. With the deposited money, the service then provides microcredit loans starting from 100 shillings ($1.16).
Collymore said the service meets an important need, as it offers financial services to underserved segments of Kenyan society. Most adults who do not have bank accounts said the largest impediments were the distance to branch facilities and high opening deposit requirements. By doing away with many fees and having no required minimum balance, M-Shwari removes many of the obstructions, he said.
"You do not need to go to a branch and fill out application forms. Just one click on your phone and you will have a bank account at no cost," Collymore said. "M-Shwari is a ground-breaking financial service innovation that will foster a culture of saving and allow Kenyans with no collateral to make small savings and access loan products through the convenience of their mobile phones at very competitive terms."
Collymore said he expects the product to encourage entrepreneurship among young people and significantly increase the number of Kenyans holding bank accounts, currently estimated at 6 million in a country of almost 42 million people.
According to the Central Bank of Kenya, more than 300 billion shillings ($3.5 billion) are held outside of banks, thereby not accruing interest, Collymore said. "I am talking about money that is hidden away under mattresses, in lockboxes or even buried away in the ground. These funds are not safe," he said.
"What this product aims to do is inculcate the culture of saving by providing many poor Kenyan families a seamless avenue to save, earn interest and borrow with ease, bringing financial inclusivity to create an inclusive society to fuel the country's journey towards Vision 2030," he said.
Vision 2030 is Kenya's development blueprint to transition the country to a middle-income economy.
M-Shwari helps small businesses
Kenya National Federation of Jua Kali Associations CEO Richard Muteti says the service is beneficial to non-professional businesses that are not normally approved for bank loans. "Jua kali" means "hot sun" in Swahili, a common term used to refer to street vendors and artisans.
Traditional banks have been reluctant to give those types of businesses loans due to their unstable nature and because their owners usually lack collateral.
"It is difficult for those in the jua kali sector to get credit or access funding from banks to expand or change their businesses because most of them fail to meet the strict conditions to qualify for a bank loan," he told Sabahi. "Even worse, some do not even own a bank account."
Michael Maina, an artisan who makes and sells beads at the Gikomba market in Nairobi, says the mobile banking and credit service has come at the right time.
Until recently, he said his major challenge had been accessing loans to buy materials for his business. "To me, M-Shwari is just a new year's gift. With it, I am sure I will be able to achieve my 2013 goal to expand my business and rent a stall where I can operate," Maina said.
He said he received a 5,000-shilling loan ($58) on January 1st, with which he bought more materials for his business. "Using the returns from the sales, I repaid the loan on Sunday," he told Sabahi, adding that he now plans to apply for 15,000 shillings ($173) to pay for a covered stall.
Agnes Wanja, a 30-year-old from the Ongata Rongai neighbourhood in Nairobi, credited M-Shwari for helping her start her business.
In the ten years since finishing secondary school, Wanja said she found it difficult to get the start-up capital to open her own floral business because she was not salaried and did not have the collateral needed to qualify.
"When I learnt about M-Shwari, I had 5,000 shillings in my account and needed an extra 5,000 shillings to start up this business," she told Sabahi. "At first, I thought I would be turned down as the bank had been doing. But when I dialled my phone to apply for the loan, I was shocked [to find] my account had 10,000 shillings ($120) minutes later."
Wanja said she finally opened her shop a week ago. She says M-Shwari was refreshing because applications, repayments and statements are made by phone and no guarantors are needed.