Category Archives: M-Shwari

Kenya Fintech Tools for Youth

A rundown of local fintech tools for phones available in Kenya, both from banks and non-banks. Most don’t give you much access to all their features till you register and It’s not clear where the user data for some of them ends up. They are mostly there for android phones, less so for iPhones. Take a spin, and share feedback if you have used them.

Non Bank One’s

Abacus helps novice or pro traders, understand and trade at the Nairobi Securities Exchange.

From CIC Group comes Bima Credo with which people can get life insurance by buying and using airtime credit. This enables consumers to pay for their life insurance premiums in affordable amounts and as part of their daily mobile airtime usage.

Mula: (Android only) is a bill payment service from Cellulant. One can pay all bills in one place, and track past payments, pay for Nairobi City parking and buy items for friends on any network. You will never forget a (recurring) bill, as Mula is fully integrated with Safaricom’s M-Pesa API so this means no copying and pasting transaction details. All you have to do is accept or decline the transaction. Another review by Moses.

M-Shwari Take part in the #52WeekChallenge With M-Shwari that locks savings and one will be able to save Kshs 68,500 ($685) a year, a handy sum, just by small periodic installments.

Open World has Open Business, a point of sale app for small businesses. They can use it to track sales and inventory in real-time. No long-term contract is required, just Kshs 500 (~$5). The app is a bottom-up fintech tool for SMEs that will enable data based lending from banks and alternative lenders.

The Safaricom App now comes with M-PESA functions and can be downloaded to Android and iOS smartphones.  The app enables customers to select contacts from their phone when sending money and customers. Aside from that, merchants will also enjoy faster payments through Lipa Na M-PESA to their accounts at 23 banks ..this will cut down the time that it takes to move money from a Lipa Na M-PESA till to a bank account from as much as 28 hours down to seconds.

Uhasibu has payroll which simplifies payroll management, including statutory payments to a half-dozen government agencies that businesses have to make every month, and these include different taxes. Another review by  Moses.

Zeep (Android): Enables teens to learn finance in a secure environment. Their parent/guardians register (*823#) then also link and register to their children/ beneficiaries/ dependents numbers. They can use the app to make payments for NHIF, land rates and business permits. They can also allocate weekly amounts to teens and watch as they pay for utilities and other bills.

Bank One’s

CBA has Loop which is geared toward the young hustler or someone who needs banking for a side gig. Tagged as unbank yourself, users, once they register and get a debit card, can pay bills and categorize items to spend on and track these against set budgets e.g. see how much they spend on food & dining., transport ( Uber) , or rent. The can also check balances, and see a financial snapshot at any time. Another review by Macharia.

Equity has Eazzy banking platform from Finserve. One can store billing details to pay after and also send money securely to another phone or bank account, pay for goods and services, buy airtime for EquiTel and other networks. One can also set and save for a goal, send money to favorite people (contacts on whatsapp, twitter, facebook) and apply for loans instantly of up to Kshs 3 Million (~or $30,000)  and track NSE shares.

Stanbic has a Kidz banking app (available in South Africa) – an educational and fun app that teaches children how to save and manage their pocket money. Kids earn money when they complete their chores and can save towards goals while parents get to approve payments, set and monitor tasks, etc.

Other banks like Coop and KCB have accounts tailored for children and young adults with extras such as book & uniform discounts and education & insurance policies, but it would be nice if they added financial education tools and apps dedicated to those bank accounts.

M-Shwari, Equitel, and Mobile Lending Apps in Kenya

Just 24 hours apart, Equity Bank and Safaricom, which arguably have the most financial connections with Kenyan citizens, through m-banking, both made financial results announcements. Equity released their Q3 2016 results while Safaricom, whose year ends in March, was announcing their 2017 half-year results.

Safaricom has M-Pesa and also powers M-shwari at CBA and KCB M-pesa while Equity has Equitel a bank in a SIM card that gets around the barrier of the M-pesa. At the beginning of the year Equity had 8.8 million customers and the country’s largest bank – KCB had 3.8 million . They are surprisingly topped by CBA with 12.9 million customers, largely due to their partnership with Safaricom called M-shwari which allows savings and lending directly from a phone SIM card.

In the results this week, Safaricom reported pre-tax half-year profit of Kshs 34 billion derived from their 26 million customers solar-2Bphone-2Bchargerand their CEO said that they process about 21,000 M-pesa transactions per minute and that 2 loans are processed every second. M-pesa revenue increased by 33.7% to Kshs 26 billion, and message revenue grew by 8.1% to Kshs 8.6 billion (with the increase in premium rate SMS revenue probably attributable to sports betting /mobile gaming)

They now have 50,000 merchants using their cashless platform called Lipa na M-Pesa, and announced a waiver on person-to-person and Lipa Na M-Pesa transactions under Kshs 100 (~$1)  “We have done this to empower the people who support this company the most – the mama mbogas, the small businessmen, and the micro-agents who form our network.”

As at September 2016, Equity had a Kshs 15.1 billion pre-tax profit, an 18% increase over last year.  The Q3 results also showed a second straight quarter of reduction in loans at the bank from Kshs 222 to 221 billion. Whether this is due to the recent interest rate-capping bill or an absence of lending opportunities, or an economic pullback is not clear, but the deposits raised by the bank went to government treasuries which grew by Kshs 21 billion in the quarter.

Equity reaffirmed an ongoing commitment to shift in customer service channels from physical branches to phone and agents. In the first year of Equitel (their telco), it did 151 million transactions in the quarter 142% more than the year before. Equitel is now the second largest move of mobile money in Kenya – at 14%, being M-Pesa (84%)  but ahead of Airtel Money, Orange Money and Mobikash.

Equity Bank has also released a series of Eazzy banking solutions and tools including (an)  Eazzy App, Eazzy Chama (investment group/SACCO management tool) and (an) EazzyAPI (for developers to build on).

Away from the two, the World Bank’s CGAP blog recently highlighted and compared several phone-based borrowing / m-banking solutions and apps available to Kenyans. They are easily accessible but unregulated, and they vary their terms, credit scoring methods, limits (which range from ~S1 to $10,000) interest rates, duration,  and the ultimate cost to the borrower. They include;  Branch, Equitel (Eazzy Loan and  Eazzy Plus Loan), Jumo/ Kopa Cash, KCB-M-Pesa, Kopa Chapaa, Micromobile, Mjiajiri, M-pawa-Sacco, M-Shwari, Okoa Stima, Pesa na Pesa, Pesa Pata, Pesa Zetu, Saida, Tala, and Zindisha.

$1 = Kshs 101

How banks are innovating around interest rate caps

With the capping of interest rates at 4% above the CBK rate comes an opportunity for banks to innovate and protect their income streams. They can do this through increased focus on mobile-based short term credit facilities as well as non-funded income streams.

More people can now afford loans. However, banks are reluctant to offer loans to existing customers who previously met their criteria. More requirements need to be met by customers in order to access the same services. Customers now have a tough time accessing credit cards and (un)secured loans. Perceptions on risk determine who gets the facility with riskier clients getting the short end of the stick.

An F-Type Jaguar at RMA Motors, Kenya

An F-Type Jaguar at RMA Motors, Kenya

Fixed and call deposit facilities are also now accessible to fewer people. New requirements such as that you need to hold an account for a certain amount of time with the bank in order to access fixed deposit services are restricting customers. Long tenures for fixed deposits have also been halved. Call deposits have been put on hold in some cases.

Banks are moving towards shielding themselves from the risk of default that will be brought about by a flood of people who can now afford to take out a loan. Collateral will become a requirement for credit facilities that did not have this requirement before. This is based on the real assumption that there will be a significant degree of default from this windfall.

Banks have also started investing more in Treasury Bills that are risk free and offer roughly the same return that they would by loaning funds to individual customers. This may be a short term move as banks wait for the waters that have been stirred up to settle. It is telling that the 364-day T-Bill is getting the most attention.

Mobile applications that increase accessibility and convenience for bank customers are currently not a significant source of funds. However, they offer an opportunity for lenders as they try to leverage on the volume of loans they have the potential to advance. MShwari-type loans could be the answer to protecting the banks’ funded income. More banks will be willing to join in advancing MShwari-type loans. This will keep people with low credit quality within the formal banking industry. Since most of them are from the unbanked population, they will be afforded some protection from predatory lending by shylocks as has been feared. Only people from selected (read known and established) companies are able to access the same loan facilities that were available to everyone. Likewise, entrepreneurs classified as less risky won’t see a significant change in their access to the facilities that they are used to. Banks have had to cut down on staff that was needed to sell credit facilities. With MShwari-type loans, some of these jobs can be saved.

More focus will be given to non-funded income streams that exist such as prepaid cards. Prepaid cards are touted as a secure way to carry cash. KCB and NIC Bank are two institutions that have put a lot of effort in making these cards mainstream.

Bankers also have the option of contesting this legislation using KBA. They can do this if they can prove that the new rates are making their business unprofitable. This could see interest rate revisions on new and existing credit facilities once in a while. An unseen consequence of this is the Monetary Policy Committee might lose its independence since they have to take into consideration bankers.

In summary, more focus will be given to customers who meet new requirements set by banks. Innovations will also be necessary to drive income growth going forward. After all, operating in white water creates opportunities in making great leaps.

Newton Kibiru, Business Development at Grant Thornton Kenya

Safaricom & CBA Launch MShwari

This week saw the launch of what is likely to be a revolutionary mobile phone product  called  M-Shwari. It comes from two long term partners – Kenyan mobile company Safaricom, well known for it’s world famous  mobile money product – MPesa, and a local bank, the Commercial Bank of Africa (CBA) who have been custodians of M-Pesa funds for years
MShwari is a savings and loan product that is immediately accessible to the 15 million users of Safaricom’s  MPesa. It gives them access to banking services – savings and loans without having to walk into a bank hall or fill out a single form. It allows them to save as little as 1 shilling (earning interest of between 2-5% a year) or borrow as little as 100 shillings (Kshs 100 is equivalent to about $1.17) and attracts no account maintenance fees or transfer fees.  It will be a great product for people who run informal businesses and take money home at night in pockets or blouses, or envelopes to stuff into mattresses, as they now have a simple tool which they can use to instantly and simply save by clicking into their phone SIM menu.
In it’s current evolution, with a maximum loan limit of Kshs 20,000 (~$235) this is not a banking product  that will threaten the banking fraternity – for now.  What it will impact are the savings and credit societies (SACCO’s) and shylocks who people turn to for payday (month-end in Kenya) and emergency loans. With MShwari, they can  apply for loans on their phones, repay by phone, get statement by phone and won’t have to get 2 or 3 guarantors (SACCO) or exchange an electronic item or vital document like a logbook (Shylock) to get it. But like with SACCO emergency loans, the terms are strict and not cheap. You can only take one MShwari loan at a time, and one has to be paid before another one can be taken up.
In the five years since M-Pesa was introduced in Kenya, banks have gone from fighting mobile phones intruding on their financial turf to fully embracing the convenience. About a dozen banks, now integrate their bank platforms with M-Pesa, a partnership between Equity bank and Safaricom got over 700,000 accounts in it’s first year, and two months ago,  Nation Hela was launched by the Nation Media Group and Diamond Trust Bank to bridge remittances in the Diaspora to debit cards and mobile phones.
But, when (then) Safaricom CEO, Michael Joseph spoke at a  Fireside Chat at the iHub in 2010, he had a warning to banks, saying that retail banking will disappear in 10 years time. Customers will not go there (to brick & mortar branches) except for loans, as ordinary banking will be on mobile phone whose convenience is unprecedented.
 
Other MShwari Notes
– The 7.5% charge per loan looks simple but can be astronomical for a repeat  MShwari borrower. However, such a person is probably already serial borrower elsewhere without  accumulating any savings.
– In terms of default protection, the loans is self securing in that for each loan, an equivalent amount of a person savings in the phone are  frozen until the loan is repaid. Also, with five years of M-Pesa data, its unlikely that people will default on an easy product. The MShwari brochure states that borrowing will be based on this savings and past usage
– The MShwari T&C go quite a way to exclude CBA from dealing with the customers who’s savings and loans they are handling by stating that no MShwari services will be performed at any CBA branches
        – A side story to this is the amazing ability of the two institutions and the several government regulators to keep a secret going for several years.