Safaricom, CBA launch groundbreaking mobile banking service M-Shwari

Safaricom and the Commercial Bank of Africa (CBA) have launched an innovative mobile banking service called M-Shwari that enables people to save, earn interest and borrow money using their mobile phones. 

The new product allows customers to save as little as KSh1 and accrue annual interest at a rate between 2-5 percent on their savings, as well as receive short-term loans between KSh100-20,000 that are payable within 30 days and accompanied by a facilitation fee of 7.5 percent. To qualify for an M-Shwari loan, an individual must subscribe to M-Pesa for a minimum of six months, deposit a portion of savings in their M-Shwari account and be a regular user of other various Safaricom services such as voice and data.

According to Professor Njuguna Ndung’u (pictured left), Governor at the Central Bank of Kenya (CBK) and former chair of AFI’s steering committee, the launch of M-Shwari is part of the ongoing banking sector’s decisive move to leverage the mobile phone technological platform to power their banking services and rides on Kenya’s unprecedented adoption rate of mobile phone money transfer services where the total number of subscribers has reached 19.7 million (as of September 2012) since Safaricom pioneered these services in April 2007.

“This upward trend in mobile phone money transfers and payments has translated to an average of 1.6 million mobile phone transactions per day valued at an average of KSh4.3 billion per day,” Ndung’u said during a speech at the product launch on 27 November 2012. “These are significant values with a transformational effect in the financial sector and the economy at large … through mobile phone financial services, banks can provide convenience and efficiency to customers, which has contributed to the increase in the number of bank deposit and loan accounts from 6.9 million and 1.2 million, respectively, in 2007 to 16.7 million and 2.1 million, respectively, in 2012 (as of September).”

Despite the convenience and efficiencies banks have presented to customers by leveraging mobile phone technology, the issue of affordability of their services still remains a major challenge, stated Ndung’u. As more customers are brought to the formal financial services space, banks and other financial service providers have started to enjoy economies of scale, which should reduce unit costs drastically, and the resultant benefits should be passed to customers through lower charges. 

“Financial inclusion is not an end in itself. It is the continued application of a variety of financial services and quality of service that matters. This can be encouraged through fair pricing of the financial products,” said Ndung’u. “Leveraging on mobile phone technology to mobilize savings as well as advancing credit is a move in the right direction. It raises Kenya’s innovation in financial inclusion to the next level and aids to retain its leadership in innovative instruments of financial inclusion. The lengthy and tedious credit appraisal processes will be minimized. As a result, M-Shwari will provide an opportunity for lowering the cost of credit. Use of mobile phone technology to process credit applications provides a source of information capital to Kenyans who may not possess physical collateral such as title deeds for securing loans.”