Page 64 - State-of-the-Industry-2013

State OF the induStry 2013

Not all mobile money savings schemes pay interest; nearly half of the providers in our sample do not pay interest, including some
banks. Some mobile savings customers choose to save, even though they don’t earn interest, demonstrating there is customer demand
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for mobile savings either for securing against theft or saving for high-price purchases. Given most bank accounts in emerging markets
are efectively negative interest, the fees exceed any possible interest earnings for low-income individuals. a truly no-fee, no-interest
account is actually a step up from the status quo.

TexT BOx 21
m-shwari: mobile moneY savings anD loans*

M-Shwari is a credit and savings product for M-PESA customers launched by Safaricom and the Commercial Bank of Africa (CBA) in
December 2012. Customers can apply for a quick approval loan, open a bank account, and move funds from their mobile wallet to an
interest-bearing bank account.

To apply for a loan there are no fees and no paperwork. M-Shwari customers can dial *234*6# to fnd out their credit limit (maxi-
mum possible loan value). To qualify for an M-Shwari loan, a customer must be an M-PESA subscriber for at least 6 months, and then
an algorithm based on their past use of Safaricom services (M-PESA, bonga points, voice, and data) is used to determine the initial
eligible loan limit. Subsequent loan limits are determined based on 1) levels of “regular savings” with M-Shwari, and 2) repayment
history of M-Shwari loans. Both loan disbursements and repayments are made through M-PESA. Loans can be taken for between
KES 100 (USD 1.15) and KES 20,000 (USD 235), have a 30-day term, and carry a facility fee of 7.5%. Failure to pay triggers the loan
to roll-over, meaning if a customer pays the loan late, the efective rate is much higher.

Ten months later, M-Shwari continues to grow and has now reached 2.4 million active users (September 2013). These users have col-
lectively deposited KES 1.8 billion (USD 21 million), and the loan balance stands at KES 800 million (USD 9.3 million). Non-perform-
ing loans have dropped to 3.8% of the portfolio, which is a good sign for the industry that their customer due diligence and credit
scoring algorithms seem to be working well. The product has increased the number of deposit accounts at CBA from under 35,000
to over 5 million in less than a year, making CBA the second largest bank in Kenya in terms of customer accounts after Equity Bank.

*This text box was adapted from blog posts by Yasmina McCarty, published on the MMU website on December 6, 2012, by Simone di Castri, published on July 8, 2013, and by Gunnar
Camner, published on November 18, 2013

36. For the debate around the payment of interest to mobile money customers, please see Simone di Castri (2013),”mobile money: enabling regulatory solutions”, page 20
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