Lenders are offering varying interest rates for loans borrowed through
mobile phone platforms. These services are registering a phenomenal
growth. PHOTO | FILE
Are you a little short on cash? Well, all you need is your handset and a good credit history.
With
the introduction of mobile banking, Kenya’s banking industry is
transforming and one can borrow as little as Sh50 via a mobile phone to
pay bus fare.
The banks have moved
with speed to launch mobile banking platforms in a bid to grow their
customer base and increase revenue streams. But what’s in it for you the
consumer?
A look at the mobile
banking services shows just how fast the lenders intend to get new or
existing customers take loans with ease.
Gone are the days when customers applied for loans, which would take a long time to process, in the banking halls.
“The
fact that a person can now borrow Sh50 to pay bus fare to work or
Sh1,000 to pay for electricity without reaching out to friends is in
itself liberating,” Kenya Commercial Bank CEO said recently.
VIRTUAL ACCOUNT
According
to Co-operative Bank’s retail banking director, Mr Maurice Matumo,
mobile banking loan application is fully automated. They are applied
for, appraised and disbursed via the phone, he told Money.
“Time span between applications to disbursement is no more than one minute,” Mr Matumo told Money.
For
instance, Co-op Bank’s MCo-op Cash give a customer a virtual account
with no monthly charges. A customer can operate it without visiting any
branch.
In March, KCB launched a
mobile phone-based loan product where customers can repay loans at a
fixed interest rate of between four and 12 per cent.
These products by Co-op Bank and KCB rival Commercial Bank of Africa’s M-Shwari, which was launched two years ago.
However,
with growing appetite for quick, unsecured loans, one needs to know the
costs and benefits associated with each micro-loan product in the
market. Here are a few:
M-Shwari (a partnership between Safaricom and CBA)
Launched
two years ago, all Safaricom subscribers can access M-Shwari service.
Subscribers can save between Sh1 and Sh100,000, and qualify for loans
ranging between Sh100 and Sh20,000.
However,
the loan depends on one’s previous loan repayment pattern and use of
other Safaricom services such as voice, data and M-Pesa.
To
qualify for your maiden loan, however, you must deposit money in your
M-Shwari savings account. The loan is payable within 30 days and
attracts an interest rate of 7.5 per cent. Defaulters risks being
blacklisted.
Data released by
Commercial Bank of Africa last month shows that it is currently
processing about 50,000 loan applications every day.
“Backed
by a dynamic mobile phone-based credit scoring system, CBA has extended
loans amounting to Sh29 billion, processing an average of 50,000 loans
per day over the last two years without demanding security or the need
for clients to visit a bank branch to apply for the loan,” CBA chief
executive officer Isaac Awuondo said.
For savers, M-Swhari Lock Savings account comes in handy.
“This
account allows M-Shwari customers to save for a defined purpose and for
a specified amount of time. The funds saved on the M-Shwari Lock
Savings account will be kept in the account until the maturity date,”
Safaricom notes in its website.
The
interest earned in M-Shwari Lock Savings account is varied. For
instance, savings below Sh999 would earn you two per cent interest rate
per annum while amounts over Sh50,000 attract six per cent interest rate
per year.
KCB Mobiloan
Under
this product, new customers are registered as part of account opening
at branch or by opening M-benki account via handsets. Existing account
holders register by completing an application form.
Customers
can access a minimum of Sh100 and a maximum Sh20,000 loan. However, the
bank says that it is reviewing the range to enhance the loan limit.
The loan attracts 7 per cent interest rate and has one-month repayment period.
KCB M-Pesa loan
The
customers opt-in, that is; open KCB M-Pesa account by dialEdwin Dande,
ling *844#. The loan limits range between Sh50 and Sh1 million with
interest rates ranging from four, three and two per cent for periods of
one, three and six months respectively.
A
borrower can opt to pay from the KCB M-Pesa loan on a self-initiated
basis before maturity of the settlement period, or let the bank recover
the money from the KCB M-Pesa account, upon maturity.
Both products have penalties of up to 10 per cent of the amount borrowed in case of defaults.
According
to KCB chief executive officer Joshua Oigara, the loans disbursed since
KCB M-Pesa launch in March stands at Sh710,227,883.
“Currently, a total of 1.3 accounts have been opened,” said Mr Oigara added.
Co-operative bank’s MCo-op Cash
Registration can be done at a branch, agent location or by self by dialling *667#.
MCo-op
Cash is an independent wallet where customers can borrow a minimum of
Sh100 and a maximum of Sh200,000. The loans are applied for, appraised
and disbursed via the phone.
One pays
between 7 and 10 per cent interest rate depending on the loan type with
a one-month repayment period. A borrower can pay off the loan before
expiry of term at their own convenience with no extra charge.
“Late
payment attracts a fee of six per cent per annum and eventual customer
listing on credit reference bureau in case they do not repay,” said Mr
Matumo, adding that being a one-month loan, each deal is treated as a
separate deal therefore, no top ups.
Equity Bank’s Eazzy 247
To
subscribe for the service, a customer dials *247# or accesses it by
downloading an application form from the Internet. One then links
his/her existing account to Eazzy 247 after which one can use his/her
handset to transact.
Equity Bank customers can access these services only when they subscribe to equitel service and get an equitel line.
Eazzy
Loan interest rate is two per cent per month of the loan amount on a
flat rate with a six per cent per annum late payment fee.
Customers can borrow between Sh500 and Sh20,000. Failure to repay the loan will see a customer blacklisted.
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