New banking platform will allow Kenyan mobile phone users to operate savings accounts, earn interest on deposits, and borrow money using their phones.
It expands on Kenya’s use of sending money by mobile phone — known as M-Pesa, “mobile money” in Swahili — launched in 2007 and now widely used across the east African nation, where some 70% of people have mobile phones.
With a minimum transfer of cash set at KSh5 – around five US cents – the application could revolutionise day-to-day banking for millions left out of the formal system, and could potentially be used for transactions ranging from sending money to far-away relatives to paying utility bills or even school fees.
Now it is hoped the new M-Shwari application — meaning “no hassle” — can do the same for savers and borrowers.
“We have always been thinking of how to move M-Pesa forward. We knew there was a boundary to be broken and the next frontier was to be reached,” said Nzioka Muita, communications manager at Safaricom, which owns both the M-Pesa and M-Shwari systems.
Through this platform, Safaricom says clients can open a bank account, move money in and out of their savings accounts, and access instant micro-credit of a minimum of KSh100 — slightly more than a dollar — at any time, all through the mobile phone application.
While loans must be repaid within a month, a single fee of 7.5% is charged, a far lower interest rate than high-street banks. Maximum loans depend on how much clients have in their M-Shwari accounts.
The mobile banking application has been so successful that on its first day of operations late in 2012, more than 70,000 new accounts were opened.
“Up to this point in time, no one in the formal banking sector had thought of implementing such an idea,” said Tiberius Barasa, an economic expert with Kenya’s Institute of Policy Research and Analysis.
At least 12m Kenyans remain outside the formal banking system, according to central bank estimates.
Safaricom controls about 70% of the Kenya mobile-phone market, translating to some 19m subscribers. Of those, some 15m are already M-Pesa users, a customer base rivalling any banking institution.
On its own, M-Pesa transactions account for more than $50m every day in Kenya.
Policy analysts believe that the biggest winners from the M-Shwari service will be those in the market previously thought unbankable, due to its meagre savings and individuals located in remote, inaccessible parts of the country.