CBA weighs options to reduce M-Shwari fees

The launch of M-Shwari money services operated through M-Pesa and CBA bank at Windsor hotel on November 27 Photo/File
The launch of M-Shwari money services operated through M-Pesa and CBA bank at Windsor hotel on November 27 Photo/File

Commercial Bank of Africa says it is likely to revise down the 7.5 per cent facilitation fees for its mobile phone-based monthly loans via the M-Shwari platform by end of the year.

CBA managing director Isaac Awuondo said the largest mobile lender will review the business model for M-Shwari – a product it co-owns with Safaricom – an indication the tier-one bank is feeling the public pressure over the charges perceived to be high when annualised.

Awuondo, however, insisted M-Shwari has a facilitation fee of 7.5 per cent for the monthly loans, which can be rolled over to the next month with the due cumulative amount becoming the new principal.

The review, he said, will seek to realign M-Shwari charges with the drop in interest rates after the Banking (Amendment) Act 2016 took effect on September 14.

The 7.5 per cent fees, the bank indicated, are likely to fall by between 18 to 30 percentage points in line with the trend in the industry. This will cut the M-Shwari fees to between 5.25 and 6.15 per cent.

The business model review may, however, result in categorisation of customers based on their specific needs and repayment capability.

“We applied for and received approval from the Central Bank for 10 per cent one-off facilitation fee in 2012. But when we rolled out the product, we started charging 7.5 per cent based on our new assessment of the risk, ” Awuondo said.

“Unlike our competitors who charge interest, M-Shwari is a zero-interest product.”

CBA’s fiercest rivals KCB and Equity have repriced mobile loans in line with the interest controls, where banks are barred from charging more than 14 per cent interest on loans, and should pay a minimum interest of seven per cent on term deposits. This is based on the 10 per cent Central Bank Rate.

The cost of credit has thus fallen from average 17.7 per cent in August.

CBK governor Patrick Njoroge on Wednesday declined to discuss specific lenders, cautiously arguing the regulator has issued guidelines on the implementation of the law which was officially operationalised on September 14.

“They just have to follow the laws that are in place. The regulator is very clear about all these other things. There are some things that are not so difficult; they are just ways of maneuvering out of things,” he said.

M-Shwari, which was rolled out in November 2012, has about 16 million customers. About 2.25 million are active monthly, with about a third of the loans advanced between 3am to 5am, CBA said.