M-Shwari, Safaricom’s mobile lending platform, experienced a significant drop in deposits during the year ending March 2023. Deposits plummeted by 44.1 percent, decreasing from Sh745 billion in the same period in 2022 to Sh416.7 billion. This marks the first decline in deposits since the platform’s launch in November 2013.
On average, Kenyan users deposited Sh1.14 billion daily into their M-Shwari savings accounts, down from Sh2.04 billion per day in the previous financial year.
These revelations come from Safaricom’s latest sustainability report. It also indicates that loans borrowed from M-Shwari increased by a modest 6.3 percent during the same period, reaching Sh91.5 billion compared to Sh86.1 billion in the previous year.
In contrast, Safaricom’s overdraft service, Fuliza, saw a substantial surge of 39.6 percent in loans disbursed, totaling Sh701.5 billion, up from Sh502.6 billion in the year ending March 2022.
This trend reflects the current liquidity challenges in Kenya, forcing individuals and businesses to rely more on credit facilities to navigate economic difficulties.
M-Shwari: The Mobile Savings and Loan Solution
M-Shwari operates as a mobile savings and loan service within Safaricom’s M-Pesa mobile wallet platform. Users can open and manage accounts through their mobile phones. The platform offers a unique feature, the M-Shwari lock savings account, allowing users to save for periods ranging from one to twelve months, earning interest of up to six percent annually.
For borrowing, M-Shwari offers loans with a nine percent interest rate, including a loan fee of 7.5 percent and a 1.5 percent excise duty. These loans are disbursed instantly into customers’ M-Pesa accounts upon application.
According to data from the Competition Authority of Kenya (CAK), M-Shwari continues to lead the digital lending market in Kenya, holding a solid 34 percent market share. Fuliza, Safaricom’s overdraft service, closely follows with a 25 percent market share.
Both M-Shwari and Fuliza serve as crucial financial resources for individuals and businesses, primarily used for addressing short-term needs such as food purchases, bill payments, and replenishing working capital for small businesses.
The decline in M-Shwari deposits reflects the challenging economic conditions in Kenya. Users have increasingly turned to credit facilities to cope with financial hardships. Whether M-Shwari can bounce back from this decline remains uncertain, as it competes in a dynamic and competitive market.
Photo Source: Citizendigital
By: Montel Kamau
Serrari Financial Analyst
9th October, 2023
