Safaricom launches new mobile banking service

By Standard Team

A new mobile banking service will allow Safaricom’s M-Pesa customers to get loans and earn interest on electronic accounts with the mobile telecommunications firm.

The service is called M-Shwari and allows M-Pesa customers to open electronic accounts by the same name with the Commercial Bank of Africa (CBA) using the Safaricom menu on their mobile phones.

Because the accounts are electronic, all transactions are by mobile phone and so CBA will avoid clogging up its banking halls with M-Shwari depositors.

A Safaricom customer can open an M-Shwari deposit account with as little as one shilling and begin earning interest rates of up to five per cent a year on their savings.

To qualify for a loan, one must have a valid M-Pesa account and agree to the terms and conditions set by CBA.

But the loans must be repaid within a month, and will attract a one-time fee of 7.5 per cent of the total loan (known as facilitation fee) to be deducted only once by the bank before disbursing the loan.

More credit

Customers of the service will be able to borrow amounts from as little as Sh100 and up to Sh100,000, the idea being that more savings means more credit.

But they also have to agree to allow CBA to access all their personal information stored on M-Pesa.

Their credit history will also be shared with Credit Reference Bureaus.

It is a partnership that deepens Safaricom’s reach in banking, but also offers CBA a chance to tap millions of low to middle-income customers who would otherwise not afford to open accounts with the bank. According to Safaricom CEO Bob Collymore, of special interest are small business owners who need cash on short notice to replenish their stock. 

“M-Shwari is a groundbreaking financial service innovation that will foster a culture of saving and allow Kenyans with no collateral to access micro-saving and loans products through the convenience of their mobile phones at very competitive terms” he said at its launch.

CBA is the main bank for M-Pesa services. The two firms are leaving nothing to chance with Collymore noting that the project has been in incubation for the last five years as the two firms worked with the Ministry of Immigration that will give them access to the ministries Integrated Population Registration System (IPRS) database.

This will help in verifying data on M-Shwari applicants. The IPRS has a detailed data on every Kenyan and foreigner from birth to death.

“The data has ID details, passport details, it has NHIF and NSSF and KRA tax numbers which make it the largest data base in Kenya for banks and other organisations to use for verification,” said Immigration Minister Otieno Kajwang.

Unlikely Spots

An estimated Sh200 billion kept in strange places, including mattresses, pillowcases and other unlikely spots are targeted in the new offering.

Finance Minister Njeri Githae noted that the product is aimed at supporting the Government’s financial inclusion agenda of ensuring every Kenyan has access to a bank account.

“Financial access has a direct link to economic wellbeing of any country, where there is low access to such services, people tend to be poorer,” he noted.

Central Bank of Kenya (CBK) Governor Njuguna Ndungu observed that the new product is part of the Government’s commitment to increase access to banking services.

“Today the country has a deposit base 6.7 million and about 2.1 million loan accounts up from 1.2 million accounts in 2007.”

“Only 10 per cent of the adult population has embraced formal banking. We need to bring on board those who still shy away from the banks and this product cater for that,” he explained.

He welcomed the product arguing that the country is heading on the right director and challenged others institutions to follow.

In 2007, Safaricom launched the money transfer service dubbed M-Pesa that has become a common means of sending and withdrawing money using the mobile phone in the country.

As of January 2010, Safaricom had a subscriber base of approximately 12 million, most of whom are in the major cities.