M-Pesa to offer mobile banking

The following article was published in mobile World Live on November 27, 2012

Vodafone, Safaricom and the Commercial Bank of Africa (CBA) are adding to the M-Pesa mobile money service with the launch of an interest-bearing savings account and the offer of small loans.

M-Pesa’s main focus since its launch has been on its mobile money transfer between individual users. The new service is called M-Shwari and offers interest rates of up to five percent on savings. Users can borrow as little as Ksh100 (£1-£1.5)

Although Safaricom previously offered the M-Kesho bank account via M-Pesa, the new offer is more straightforward and mobile-orientated, according to mobile money experts contacted by Mobile World Live.

Users can sign up to the new account direct through the menu on their mobile phones. There are no forms to fill in and users do not need to visit a bank branch.

According to Tonny Omwansa who with Nick Sullivan wrote Money, Real Quick: The Story of M-Pesa,: “The product looks more promising than M-Kesho. It’s more streamined, no transaction costs as money moves between M-Shwari and M-Pesa. Also more loans can be accessed than with M-Kesho which had a limit of about Ksh5,000. M-Shwari is up to Ksh100,000.”

He also pointed to some drawbacks to the new account. “It is not transformative,” he said. An alternative might have been to redesign M-Kesho, he suggested, which was developed with the larger Equity Bank.

Also, CBA is not known as a bank for the low income earners unlike Equity. A borrower is required to repay the 100K loan in one month. “No poor guy is going to take such a loan. Middle class people will do,” he said.  Better rates of interest are available for poor people from microfinance institutions, he said. And such services need to be accompanied by initiatives that develop ongoing relationships with the borrowers.

The highly successful M-Pesa has had an impact on the wider economy of Kenya and become a much-imitated approach for other such services around the world, although with mixed results.

The new service was described as “a groundbreaking financial service innovation” by Bob Collymore, Safaricom’s executive director (pictured).

Historically, mobile money services in the developing world have concentrated on activities such as money transfer rather than offering savings and loans to their subscribers, even though such users typically have no access to conventional banking services.

Vodafone, which holds a 40-percent stake in Kenya’s Safaricom, owns the M-Pesa concept. CBA will provide both the saving accounts and the loan service for M-Shwari.

To establish user’s eligibility for a loan, CBA studies the customer’s individual M-Pesa transactions and savings history. This mean a user will need to be an existing M-Pesa customer but given the service’s high penetration in Kenya, this should not be barrier to take-up.

In a statement, Michael Joseph, director for M-Pesa within Vodafone, described M-Shwari as “a transformational service; saving is no longer the privilege or an elite”.

Depending on take-up in Kenya, Vodafone might launch M-Shwari in other markets where it has a presence. M-Pesa was launched in other markets after its initial success. Among the markets where it launched, M-Pesa proved popular in some locations such as Tanzania but less so in others such as South Africa.

At the recent GSMA NFC & Mobile Money Summit in Milan, Joseph accused other mobile operators have failed to back mobile money services with the necessary time and resources to make a success of them.