Firms turn mobile phone users into new battle ground for loans, money transfers

Financial service providers are turning their guns on network subscribers making them their next hunting ground for loan applicants. Yesterday, AVLC Group, a private lending firm, launched a mobile loan service dubbed Pesa-na-Pesa (PNP) that would see users borrow between Sh500 and Sh10,000. This comes even as Kenya Commercial Bank (KCB) announced that 1.8 million customers had signed up for its KCB/M-Pesa service.

The service allows users to deposit cash and borrow up to Sh1 million for up to six months via their mobile devices. Airtel is also partnering with Africa Business to offer credit services to its customers.

Figures from the Central Bank of Kenya show that transactions carried out via mobile phones rose by 24.7 per cent to Sh2.37 trillion in 2014 compared to Sh1.9 trillion that was transacted through the same channel in 2013.

Most of these loans are micro-credit loans. They start as micro-credits before growing into huge loans. Unlike KCB/M-Pesa, which has an upper limit of Sh1 million, PNP has capped theirs at Sh10,000. The interest rate for PNP is 10 per cent and repayment period is between seven and 10 days. “The product is micro-credit and is being worked around the aspect of emergency borrowing, but it will grow,” said the Chief Executive Officer of AVLC Group, Andrew Kanyutu.

In 2012, Safaricom in partnership with Commercial Bank of Africa launched M-Shwari which enables people to save, earn interest and borrow money using their mobile phones. The service has since surpassed 10 million customers. Before M-shwari, KCB/M-Pesa and Pesa-na-Pesa came into the picture, there was the defunct M-Kesho, a partnership between Equity Bank and Safaricom under which registered M-Pesa account holders could get loans based on their M-Pesa usage and deposits. They could also earn interest on their M-Kesho accounts.

Kanyutu did not however think Pesa-na-Pesa would ruffle any feathers. “We are not here to compete with existing products, we are actually here to complement them through strategic partnerships,” said Kanyutu.

He said applicants can get loans via any mobile phone provider, adding that a customer has the choice of borrowing against NSE shares, employer or chama guarantees and credit scores among others.