Safaricom and Commercial Bank of Africa (CBA) will cut the price of M-Shwari loans to defend market share now under attack from resurgent mobile loan firms.
CBA Group managing director Isaac Awuondo said the reduction will be segmented and favour borrowers with a good credit history. The move is seen as a reaction to the increasing number of players in the mobile loans market as commercial lenders rationed credit after the October 2016 rate caps.
Several lenders including Equity Bank, KCB and Co-operative Bank of Kenya also offer mobile micro loans.
M-Shwari was established five years ago on M-Pesa mobile money platform as a credit facility for those locked out of the market for lack of collateral and credit history. It charges a one-off facility fee of 7.5 per cent.
"The anchor price, which was put forward when the product was launched was a transaction charge of 7.5 per cent, which is a facility fee with zero interest rate. When we begin segmenting we will be looking at reducing the facility fee to a number we hope could be below 7.5 per cent," said Mr Awuondo when CBA kicked off celebrations to mark five years of the product in Nairobi.
To attract more customers, CBA and Safaricom will also introduce a rebate on the M-Shwari facility fee to customers who repay within 10 days.
Mr Awuondo said the service has disbursed Sh230 billion loans since its launch in November 2012. It has attracted Sh669 billion deposits from its 21.1 million customers.
Mr Awuondo said M-Shwari receives an average 300,000 loan applications a day with between 70,000 and 100,000 customers, or more than half, successful.
Close to 30 per cent of the micro loans are granted between 3am and 6am offering mainly as short-term working capital to small-scale traders including vegetable vendors.
"When we look at our customers' daily lives and we follow them from the time they wake up to the time they go to sleep we see that in the trajectory of their daily lives the time that they use M-Shwari the most is between 5am and 9 am," Safaricom consumer business general manager Sylvia Mulinge said.
Mr Awuondo said bad loans ratio for the micro loans is at an "acceptable" level.