M-Shwari, Safaricom’s mobile lending platform, witnessed a significant downturn with a 44.1 percent drop in deposits from March 2022 to March 2023. The total deposits plummeted to Sh416.7 billion, marking a sharp decline from the Sh745 billion recorded in the previous year, a first-ever decline since the platform’s inception in November 2013.
On average, Kenyans deposited Sh1.14 billion daily into their M-Shwari accounts, demonstrating a nearly 50 percent reduction from the Sh2.04 billion daily savings seen in the preceding financial year. This substantial decrease in deposits highlighted the economic hardships faced by citizens, leading to a reliance on credit facilities.
Safaricom’s latest sustainability report unveiled these startling statistics, indicating a 6.3 percent increase in loans borrowed from M-Shwari, amounting to Sh91.5 billion compared to the Sh86.1 billion borrowed in the previous year. Meanwhile, Safaricom’s overdraft service Fuliza experienced a 39.6 percent rise in loan disbursements, reaching Sh701.5 billion, up from Sh502.6 billion in the year ending March 2022. This trend highlighted the liquidity challenges faced by the populace, forcing them to depend heavily on credit options to navigate their financial struggles.
M-Shwari, a mobile savings and loan service integrated with Safaricom’s mobile wallet platform M-Pesa, provides users with the convenience of managing their accounts via 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 an annual interest rate of up to six percent.
Simultaneously, M-Shwari loans, priced at nine percent, are instantly disbursed to customers’ M-Pesa accounts upon application. Recent data from the Competition Authority of Kenya revealed that M-Shwari commands a significant market share, accounting for 34 percent of the digital lending industry, closely followed by Fuliza with a 25 percent market share.
The challenges faced by borrowers were made worse by the Central Bank of Kenya’s decision to raise the Central Bank Rate (CBR) from 8.75 percent to 9.5 percent. Despite this hike, M-Shwari chose to maintain its lending rate at 7.5 percent, providing a slight relief to its users. In contrast, competitors like KCB M-Pesa responded to the CBR increase b; y raising their rates to 8.85 percent.
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