News Column

Now CBA and Safaricom Target Fixed Term Savers

June 17, 2014

James Waithaka

M-Shwari users will now access fixed deposit services for periods starting from six months in a move set to shake up the banking sector further through the mobile phone-based innovation.

M-Shwari, a mobile phone-based savings and loans bank account, is offered by the Commercial Bank of Africa in partnership with Safaricom under M-Pesa, its mobile money transfer platform.

As a bank account, M-Shwari enables users to save and borrow loans payable within 30 days at monthly interest rates of 7.5 per cent. Defaulters are charged a penalty equivalent to the monthly interest rate if the 30-day repayment period is breached.

CBA awards interest at a rate of two per cent per year for money retained in the account for at least two months. Under the fixed deposit service dubbed 'Lock' savings account, savers will earn interest at a rate of six per cent per year for saving at least Sh500 for six months.

CBA yesterday said the 'Lock' account has been introduced due to "recurrent customer feedback" which suggested need for such a facility.

"The 'Lock' savings account is being put forward as an enhancement to M-Shwari. Effectively a customer will have two wallets ... one for short-term savings and this that will allow them to put money aside for long term purposes," said Eric Muriuki, the general manager at CBA.

"A customer will save according to what their requirements are ... for more committed purposes."

M-Shwari has proved popular since its launch 17 months ago targeting the unbanked, allowing them to save as little as a shilling, and borrow between Sh100 and Sh20,000. The borrowing limit has since been raised to Sh50,000, likely driven by micro and small business owners' demand for credit.

Muriuki said at least 150,000 customers are depositing on M-Shwari daily, amounting to savings of up to Sh250 million. However, he said, only about 20 per cent of these customers keep the money for long term while most retain for about 12 days.

"Taking advantage of the ubiquity of the mobile phone and the general lack of access to formal financial services by a majority of the Kenyan population, M-Shwari provides a quick and efficient way to access banking services on the mobile phone," the firms said in a statement yesterday.

Ease of opening the M-Shwari account via M-Pesa, means subscribers do not need paper work to enrol or additional details other than those used to register on M-Pesa, has propelled its popularity.

CBA's loan accounts increased by 907 per cent in 2013, the Central Bank's Bank Supervision Report 2013 shows, rising to 897,000 from 89,000 in 2012. This has catapulted it to the top in terms of loan account market share with a 29 per cent, from a mere 4.2 per cent in the previous year.

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Source: AllAfrica

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