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Kenyan firms make a killing from mobile lending

NAIROBI (Xinhua) -- Firms in Kenya lending money through mobile phones have registered a roaring success as more and more citizens choose to borrow via such a channel.

Millions of citizens are currently hooked to the service borrowing from as low as one dollar a day, and banks and telecoms are reaping big from the service.

Industry data showed that about 90 percent of loans in the East African nation are currently disbursed via mobile phones by commercial banks and telecoms.

Most of those borrowing are both low and middle income earners taking between 30 U.S. dollars and 200 dollars per borrowing, especially during the weekend, at an average of 8 percent.

Commercial Bank of Africa (CBA), which partnered with leading telecom Safaricom to pioneer M-Shwari, the first mobile phone loan service, is among financial institutions that have recorded great success.

The bank’s virtual lending platform, which is now five years old, has 18 million customers, an indication of the popularity of the service.

The east African nation has some 30 million mobile money subscribers, which means M-Shwari has amassed over half of them in just five years.

The bank noted that it disburses up to 72 million U.S. dollars a month, the highest in the East African nation, at 7.5 percent per loan.

“The total cumulative loans issued under M-Shwari stood at 72 million dollars per month as at March compared to 62 million dollars per month in March 2016,” said CBA in a statement on Wednesday.

As at March, the bank noted, registered customers of the platform stood at 18.3 million compared to 14 million in the same period last year.

With the huge number of customers, the mobile platform has made CBA the biggest bank in Kenya by customer base.

“We would mark M-Shwari’s fifth anniversary by announcing some product enhancements geared at deepening financial inclusion further, and reward customers for their loyalty,” said CBA, with its loan book standing at over 281 million dollars.

Equity Bank is another lender whose fortunes have risen thanks to mobile phone lending. Chief Executive James Mwangi recently announced that 82 percent of loans the bank disburses are through the mobile phone.

Since starting its mobile lending service Equitel in 2014, Mwangi said the platform has so far issued loans worth 550 million dollars.

A total of 7.5 million loan requests have been processed, with eight out of every 10 loan demands disbursed via Equitel. Average loan size stands at 82 dollars as at June compared to 39 dollars in June 2015.

The institution’s loans start from one dollar and are charged a capped interest rate of 14 percent per annum, or 1.16 percent per month with repayment period limited to a year.

For KCB, 91 percent of its total loans are processed via mobile platform, with requests standing at 80,000 daily. Its total customers have risen to about 10 million, with more than half via the mobile phone.

Besides banks, the success of mobile lending has showered business opportunities on lending apps.

They include Branch, Tala, Saida and Mombo Mobile, and like the banks, they issue short-term loans via mobile money and charge a processing fee. In July, Facebook-linked Branch said it had disbursed 35 million dollars since launching in Kenya in April 2015.

“Convenience, lack of collateral and even habits are responsible for the faster growth of mobile lending and banks are really cashing in on it. The product is among the most successful for banks in recent times as the business environment changes for the institutions,” said Ernest Manuyo, a business management lecturer in Nairobi.

In fact, according to Manuyo, with the products, banks have found a way of beating the law that capped lending rates at 4 percent above Central Bank rate, currently at 10 percent as they charge between 7 and 10 percent one-off rate. 



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