Safaricom’s M-shwari has increased the number of loan borrowers by 1.7 million in just six months, which is from January to June; according to the latest data issued by the Central Bank of Kenya (CBK).
This is a 82 percent increase in number of bank loan accounts which makes a total of 3.8 million, compared to only about 95,000 new borrowers enlisted in the whole of 2012; and M-Shwari is the reason behind this.
M-Shwari allows Safaricom subscribers to open a bank account with CBA through their mobile phones, save money and borrow based on their M-Pesa usage records.
The report also ranked CBA the second after Equity bank as the number of deposit accounts in the country had crossed the 20 million mark boosted also by M-Shwari.
CBA said that some of M-Shwari subscribers can now access loans of up to Sh8,000 based on their savings trends on their M-Pesa accounts.
Other lenders have also been looking for ways of tapping into Safaricom’s more than 20 million subscriber base with mobile phone based products.
It seems that involving the Mobile Phone in banking is the way to go, as other banks that have embraced mobile banking have seen a remarkable increase in banking. Some of them include KCB with M-Benki, Family Bank with PesaMob and very recent Equatorial commercial bank with GoMobile.
Linkage of mobile phones to bank accounts has enabled access to financial services and credit by low-income earners who have for a long time been excluded due to a lack of collateral and banking history.
“In July the lending to households surpassed loans to manufacturing, which shows banks are rolling out more loans to individuals,” said Standard Investment Bank’s Francis Mwangi.
The Central Bank did not give data on the sectorial distribution of loan accounts, nor whether the short term bank overdrafts were included in the number of accounts. A recent survey by the World Bank showed that most people borrow to meet short-term cashflow needs and not for investment.
“Kenyan firms cite working capital shortages as the primary reason for approaching banks. The distribution of loans may also reflect banks’ assessment that long-term loans are too risky,” said World Bank in a report dubbed Reinvigorating Growth with a Dynamic Banking Sector.