Six months ago, Jane Adhiambo Achieng walked into a local Kenyan bank with the hope of getting a loan for her small grocery business.
After providing all the paperwork and after weeks of back and forth between her and bank officials, she was turned down.
“They just told me I don’t qualify. My income was too little,” said 42-year-old Achieng, who was asking for about US$250 — about half her monthly turnover — to expand her fruit and vegetable stall in the Kenyan capital.
However, last month, she applied for the same amount through a different source — and got the money in a matter of minutes.
She credits the Kenyan mobile telephone money application called M-Shwari that lent her the cash for facilitating the growth of her business.
M-Shwari is a new banking platform that allows subscribers of Kenya’s biggest mobile network, Safaricom, to operate savings accounts, earn interest on deposits and borrow money using their mobile phones.
It expands on Kenya’s revolutionary 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 about 70 percent of people have mobile phones.
With a minimum transfer of cash set at 5 shillings — about US$0.05 — the application revolutionized day-to-day banking for millions left out of the formal system, and is 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 100 Kenyan shillings — slightly more than a US dollar — at any time, all through the mobile phone application.
While loans must be repaid within a month, a single fee of 7.5 percent 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 last year, 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 12 million Kenyans remain outside the formal banking system, according to central bank estimates.
Safaricom controls about 70 percent of the Kenya mobile-phone market, translating to about 19 million subscribers. Of those, about 15 million are already M-Pesa users, a customer base rivalling any banking institution.
On its own, M-Pesa transactions account for more than US$50 million every day in Kenya.
“This is a huge head start for the company,” Barasa said.
M-Shwari was launched in partnership with one of Kenya’s privately owned banks, the Commercial Bank of Africa (CBA), a deal that could see it boost its slice of the banking sector of east Africa’s largest economy.