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M-Shwari:
The Story So Far
April 2015
7 out of 10 Kenyans are active mobile money users:
8 out of 10 Kenyans live within 5km of financial access point:
Enter M-Shwari: a savings and loan bank account
exclusively accessed through M-PESA
HOW M-SHWARI WORKSPeace Osangir, Financial Risk Manager
Commercial Bank of Africa
What is M-Shwari? Mobile-based banking service provided by CBA through the Safaricom mobile channel.
Product Offering: Banking products that provide convenience, reliability and cost-effectiveness for making micro-savings and taking micro-loans.
Target market: All M-PESA customers; to enhance the M-PESA value proposition, whileaspiring to deepen Financial Inclusion in Kenya by offering a bank deposit and creditproduct.
Purely unsecured
High Volume, low value, high frequency transactions
Short term (1 month)
Services offered by M-Shwari…
Deposit:
Withdrawal: transfer from M-Shwari to M-PESA
Loan request
Loan repayment
Balance enquiry
Mini statement
Highlights of Product Features
– Customer Promise
Banking service that is accessible and convenient
True partner to offer better savings option in time of plenty and reliable help in times of need
We trust you with our money even before you trust us with yours
Credit offered/rejected discreetly, without much hustle
Your character counts.
Deposit Features Credit Features
No minimum balance requirement to open account Loan amounts range from USD 1 – USD 500
Electronic customer enrolment and account activation Loans offered at a 7.5% one-time fee for 30 days
Defined KYC criteria and verification workflow Customer allowed to roll-over debt for another 30 days at a fee of 7.5%
Deposit Limits defined for Tiered KYC Levels No compounding penalty interest for delayed payments
Deposit insurance of up to a max. of KES 100,000 (USD 1,100)
Customer information to be used for credit scoring
No charges levied against account (no value erosion) Promote savings – credit strongly linked to savings profile
HOW M-SHWARI WORKS
How M-Shwari Works
8Sec
Turn around time on account activation
6Sec
Turn around time on transaction processing
Instant electronic customer enrolment and account activation
Electronic KYC verification
Instant credit scoring and credit limit assignment
CREDIT SCORING
Initial scorecard & Limit Assignment
Customer profile
Mobile Money usage
Telco Airtime
data
Subsequent limit Adjustments
Customer profile
M-Shwari Product Usage
Subsequent Limit
increase
Dat
a So
urc
esSc
ore
card
Dev
Loan Performance• USD 339.4M in loan disbursement• 300 bps better NPL rate than industry average as at Dec
2014
Repayment Triggers• SMS reminders• Limit sanctions• CRB listing
Value Proposition
1111
LOW-INCOME KENYANS AND THE LIQUIDITY CRUNCHJulie Zollmann, Principal Investigator
Kenya Financial Diaries
There’s not enough money.
Buy stock for business
$30
Have
US$ 33Need US$ 71
72% of Diaries households live on less than $2/day.
Out of a monthly income of US$100, after absolute essentials, …
Income is very volatile.
Median household’s income fluctuates
54% from
month to month.
If Average Income=US$ 100
Good month: US$ 150
Bad month:US$ 50
Short-term LiquidityLonger-term Investment
There are tradeoffs between stretching and growing money.
Falling Short on
Both
“We cannot sleep hungry while money is on the phone.”
Money should be working!
People use a whole range of financial devices to stretch and grow.
PatrickJua kali artisan worker in Nairobi
who supports three sons with him and wife and kids upcountry
Median HH=14 devices
But they face a huge range of risks.
Temporary disabilityPermanent disability
Chronic IllnessHospitalization Outpatient treatmentDeath of relative
Death of main income earner
Divorce, separation
Loss of income source
TheftAttack
Legal case
Eviction
Fire
Death of livestockDrought
Crop disease0
10000
20000
30000
40000
50000
60000
70000
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
All Households Incidence & SeverityProbability of Population at Risk Experiencing Event in One Year (%) by Median Cost of One Event (KSh)
FrequencyLow
FrequencyHigh
Financial ImpactLow
Financial ImpactHigh Module:
5 yearsColors indicate population
at risk:
All household members
Adults
Households
Households who owned
livestock or cultivated land
during Diaries
Savings in the house and social networks help, but leave gaps.
Temporary_disabilityTemporary_disability
Permanent_disabilityPermanent_disability
Chronic_IllnessChronic_Illness
HospitalizationHospitalization
Outpatient_treatmentOutpatient_treatment
Death_of_relativeDeath_of_relative
Death_of_main_income_earnerDeath_of_main_income_earner
Divorce,_separationDivorce,_separation
Loss_of_income_sourceLoss_of_income_source
TheftTheft
AttackAttack
Legal_caseLegal_case
EvictionEviction
FireFire
Death_of_livestockDeath_of_livestock
DroughtDrought
Crop_diseaseCrop_disease
savi
ngs_
form
al
savi
ngs_
cash
savi
ngs_
mpe
sa
savi
ngs_
mon
eygu
ard
savi
ngs_
cham
a
borr
ow_c
ham
a
borr
ow_f
amily
borr
ow_f
orm
al
borr
ow_i
nfor
mal
borr
ow_e
mpl
oyer
good
s_on
_cre
dit
accr
ue_a
rrea
rs
insu
ranc
e
wel
fare
_gro
up
reso
urce
s_re
ceiv
ed
sell_
asse
t
wor
k_m
ore
othe
r
0-1 1-5 5-20 20-40 40-60
Heat Map of Coping Strategy by Shock
Saving the house
RR
For example, in health, existing tool box incomplete.
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
Saving inhouse
Socialnetwork
Bank saving Chamasaving
Borrow fromnetwork
Sell assets
Sweet spots of financing for health
Most common resources
Small, on demand credit can ease the tradeoff between stretching and growing.
0
1000
2000
3000
4000
5000
6000
7000
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
20000
School Fees Payments and Aggregate Income, KSh
Total income School fee payments
Primary kids sent home
Install electricity,
buy tv
Pay lots of school fees, still primary
kids sent home for lunch/food
Primary child sent home. Out of food
from last harvest.
Vivian sent home in Sept &
early Oct. Misses several days of classes.
21
WHY M-SHWARI WORKSClaudia McKay
M-Shwari Demographics: 2013
M-Shwari Demographics Shifting
M-Shwari offers easy access to small amounts of liquidity in a way that fits how low-income people think about finances.
“My son was bleeding a lot from the nose and I was just
back from the market and had used all of the money. I
needed $12 and that money helped a lot.”
“I am in transport business. Not all the time do I have
money so I can borrow money to help out my drivers when
they are caught by the police.”
Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think about their finances
1
2
3
4
4 REASONS FOR HCD IMPACT: Why so popular?
Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think about their finances
1
2
3
4
4 REASONS FOR HCD IMPACT: Why so popular?
Interviewer:“The first time you were
activating M-Shwari, is there anyone who did it for you?”
Edwin:“Nobody! I just followed the procedure. When you go to M-PESA menu, there is M-
Shwari. It is just logic.”
Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think about their finances
1
2
3
4
4 REASONS FOR HCD IMPACT: Why so popular?
“All I do is just play with my money by moving it back and forth. I love to play that game between M-Shwari and M-PESA.”
Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think about their finances
1
2
3
4
4 REASONS FOR HCD IMPACT: Why so popular?
Challenges of Transparency and Disclosure
Visit
www.cbagroup.com/
m-shwari
www.Safaricom.co.
ke
OK Back
Terms and
conditions read
and accepted?
OK Back
Why is M-Shwari important beyond Kenya?
First large-scale loan product using a person’s telecom data to make initial credit
decision
How else can digital information be applied to poor and unbanked segments?
Why is M-Shwari important beyond Kenya?
First successful bank account layered on a mobile wallet used by majority
Demonstrating mobile money rails can be used to bring the unbanked into the formal banking sector
Advancing financial inclusion to improve the lives of the poor
www.cgap.org