Money Markets
An M-Shwari branded bus termini in Nairobi. The Commercial Bank of
Africa mobile banking platform had 9.2 million savings accounts by end
of last year. PHOTO | EMMA NZIOKA
By GEORGE NGIGI, gngigi@ke.nationmedia.com
In Summary
- Research by FSD Kenya shows fixed-deposit M-Shwari accounts had 103,000 users at the end of December.
- The average balance was Sh5,984. This puts its total savings at an estimated Sh616 million.
- The fixed-deposit account gives customers a higher interest rate to save a minimum of Sh500 for a defined period of one to six months.
Commercial Bank of Africa (CBA) opened more than
100,000 M-Shwari fixed-deposit accounts in the first six months of
introduction underlining the growing importance of mobile banking.
Research by FSD Kenya shows the product launched in June
last year had 103,000 users at the end of December. The average balance
was Sh5,984. This puts its total savings at an estimated Sh616 million.
The product allows a user to lock their cash in an account for a period until they meet a set target.
“As of December 2014, 103,000 lock savings accounts
had been opened with over half active with an average balance of
Sh5,984, average goal was Sh7,656 and 4.5 months goal duration,” reads
the report.
The fixed-deposit account gives customers a higher
interest rate to save a minimum of Sh500 for a defined period of one to
six months.
The rate offered is one per cent above the M-Shwari
rates for amounts exceeding Sh1,000. M-Shwari pays a quarterly interest
of two to five per cent, based on average daily balance. This is higher
than the 1.5 per cent return offered by commercial banks as reported by
Central Bank of Kenya.
Fixed-deposit account operated by banks usually
target large depositors with minimum values set at Sh20,000 while some
banks insist on a minimum balance of Sh50,000.
M-Shwari was launched in November 2012 by CBA in partnership with Safaricom
allowing users to save and borrow using their mobile phones. As at end
of last year it had opened 9.2 million savings accounts and issued a
cumulative 20.6 million loans.
Most of the savings were, however, short term driven by the need to create a history to allow them to borrow.
To lock in the funds CBA introduced the lock
savings last year allowing customers to move cash for free to the fixed
accounts from their M-Shwari accounts.
A customer wishing to make an early withdrawal has
to wait for two days and will receive only the ordinary M-Shwari
interest rate.
Mobile money has grown in influence on the
country’s financial services landscape. Equity bank recently acquired a
mobile virtual network operator licence which will see it compete with
M-Pesa in the mobile-money transfer market.
Earlier this year Safaricom partnered with KCB to launch the KCB M-Pesa account.
The account had registered more than one million users in its first
month of operation with the average loan size standinging at Sh3,000.
Defaults on the platform have also shrunk with CBA
reporting 2.2 per cent non-performing loans. The banks have been listing
defaulters of the small loans with credit reference bureaus,
effectively locking them out of the credit system if they do not settle
the outstanding amounts.
Uptake of mobile banking has led to increased financial
inclusion in the country, ranked top in the continent for providing
access to financial services.
A Moody’s report released earlier this month shows 75 per
cent of adults in Kenya have a bank account — including mobile banking
accounts — against an average of 34 per cent in the sub-Sahara Africa.
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