Kenya's latest mobile money innovation takes off
Transactions on Kenya's latest mobile banking innovation, M-Shwari, crossed the Sh1 billion ($11.6 million) mark at the close of last year in an overwhelming uptake that could force the country's banks back to the drawing board.
By December 27, barely a month after its launch, M-Shwari customers had borrowed over Sh123 million ($1.43 million) and deposited in excess of Sh976 million ($11.35 million) in savings, with the biggest activity recorded among the youth aged between 25 and 30.
The product allows users to save and borrow money through their cell-phones while also earning interest. Eligible customers can also qualify for emergency loans.
"We are overwhelmed at how well the product has picked up and the show of confidence from our customers. This product will clearly change the game in the local financial sector,” Mr Jeremy Ngunze, the Commercial Bank of Africa (CBA) chief executive told the Daily Nation in an interview at the weekend.
The bank is the custodian of the funds deposited on the platform which is run by Safaricom, Kenya's largest telecoms firm and which also hosts the globally-recognised M-Pesa money-transfer service.
Mr Ngunze now sees the new product as the perfect customer-attraction and retention tool especially because it gives the bank access to over 15 million customers who are already on the M-Pesa platform.
"We have adopted a different strategy from what other players are applying to increase their footing and reach to potential customers at the grassroots level. We believe this was the right decision because we now have easy access to millions of new customers given the level mobile penetration Kenya enjoys,” Mr Ngunze said.
Many Kenyan banks have resorted to agency banking to rope in more clients for the billion-shilling profit industry.
The phenomenal growth of M-Shwari is likely to cause jitters in the banking industry since it offers similar products as commercial banks, but with extra convenience because users do not have to queue in a banking hall.
CBA has said it has experienced a significant expansion on its balance sheet since the launch of M-Shwari in addition to many accounts being opened everyday. Its effect is expected to impact significantly on the bank’s turnover, Mr Ngunze said.
According to the lender, plans are currently underway to roll out the product in Tanzania despite the slow uptake of M-Pesa recorded in the neighbouring country.
“We are definitely going to launch the product in Tanzania very soon. We just need to come up with a strategy that will work to yield results as seen in the Kenyan market,” Mr Ngunze said.
But the product’s strong showing at start is not without challenges, the biggest being an ongoing ownership dispute in court.
Faulu Kenya, a local micro-finance institution, claims Safaricom used its concept without permission to develop the product.