Safaricom's M-Shwari platform set to shake up small loans market

Borrowers seeking short term funds, in particular will also find the 7.5 per cent interest competitive since banks normally charge a 10 per cent interest on overdrafts while shylocks charge more exorbitant rates.

CBA will rely on the spending patterns of Safaricom customers across various products offered by the telco to build a credit assessment and risk profile that will ultimately inform the loan size a customer can secure.

The bank will use the amount of airtime used by post-pay subscribers, their M-Pesa transactions and the deposits on M-Shwari. A borrower who does not settle the principal and interest within the 30 days shall be deemed to be in default.

This would attract a further interest of 7.5 per cent on the defaulted amount and the total outstanding balance shall be rolled over to the next 30 days.

“In addition to paying the outstanding amount in respect of the loan any outstanding facility fee, pay to the bank a roll-over fee being 7.5 per cent of the outstanding amount in respect of the loan (the Roll-Over Fee),” reads part of the terms and conditions of the service.

If a customer fails to pay the balance within the 30-day extension they will forfeit deposits in M-Shwari that will act as collateral.

The defaulter also risks being blacklisted by banks and micro-finance firms as his tarnished credit history will be shared with the credit reference bureaus.

For subscribers to qualify for M-Shwari services, they will have to be 18 years of age and be registered users of M-Pesa, giving CBA access to information necessary for Know Your Customer prudential requirements.

CBA is hoping to hook a large segment of Safaricom’s 19 million subscriber base to M-Shwari as well as the telecom firm’s network of 47,000 distribution agents to deliver the service.

For Safaricom, the service is set to further boost its earnings from M-Pesa, which was introduced as a money transfer tool but has evolved into a utility bills payment and credit service. Daily M-Pesa transactions stand at two million and are valued at Sh2 billion.

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