M-Shwari savings surpass Sh32b mark amid borrowing frenzy

Treasury CAS Nelson Gaichuhie (left) and NCBA Group  Director John Gachora during the launch of the NCBA Economic Outlook Report 2020. [Wilberforce Okwiri, Standard]

Customers have saved Sh32 billion on NCBA mobile account, M-Shwari, and used it to borrow nearly three times the amount.

NCBA Group Managing Director Mr John Gachora says the amount was in the lock savings account at the end of December last year, marking a growth from Sh28 billion.

“That is a number that has grown from Sh28 billion and we regard it as a lot. We have to keep preaching about saving because many people look at M-Shwari as a borrowing product yet it was conceived as a savings platform,” said Mr Gachora.

The Sh32 billion savings came in the period customers borrowed Sh88 billion on the M-Shwari product - meaning borrowings are about 2.75 times the savings.

M-Shwari is underwritten by NCBA and is linked to Safaricom’s M-Pesa. It allows customers to save as little as Sh1 and access digital loans from Sh2,000.

Customers earn interest of up to 6.3 per cent per year on their savings balance if they put the money in a locked savings account that is also under M-Shwari.

Money can be saved on M-Shwari lock savings account for between one to 12 months.

Customers with a good savings and repayment history can tap into as high as Sh1 million using the M-Shwari product. Charges on M-Shwari loans are nine per cent, made up of 7.5 per cent fees and 1.5 per cent excise duty.

M-Shwari loans add to other digital loan products such as Fuliza and KCB-M-Pesa which continues to attract many Kenyans seeking short-term loans.

NCBA disclosed that borrowing via Fuliza, an overdraft that is disbursed through M-Pesa hit Sh482 billion in the year to December 2021.

Safaricom Chairman Michael Joseph. [File, Standard]

A further Sh96 billion or 60.8 per cent of the Sh158 billion that KCB disbursed via mobile phones was through Fuliza - a 32 per cent rise from Sh73 billion a year earlier.

Fuliza fee starts from Sh2 per day for Sh100 overdraft and goes up to Sh30 per day for Sh2,500 and above. Customers who do not clear the overdraft within 30 days are barred from utilising their unused Fuliza limit until they settle the outstanding amount.

Safaricom Chairman Michael Joseph in a recent interview with The Standard said that for all the good things M-Pesa has brought, he feels disturbed by the borrowing frenzy.

“When I introduced M-Shwari, the plan was that it was going to be a savings and borrowing product. So first, you save and get the habit of saving. Then after saving, you borrow money based on your savings,” Mr Joseph said.

“That was the plan. But unfortunately, it never worked out that way. People borrow more than they save, which is not what I intended.”

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