Telling The Mshwari Story

Mshwari. What comes to your mind whenever this word is mentioned? Do you see success? Do you see development? Do you see financial inclusion? I do.

Since its inception, the Mshwari story is beyond reproach, sailing from one level of success to another. 

All the way from introducing and sustaining the culture of saving among Kenyans to giving loans from as low as 100 shillings to as much as 20,000 shillings.

Mshwari, a product of CBA, born in 2012, gives more than its 16 million customers an opportunity to save as well as taking loans via their mobile phones.

Saving on Mshwari is not just like other savings where you just place your money and it remains stagnant. Imagine, putting your money somewhere for a given period of time and that money grows at a rate of 7.35 percent per annum without you dropping a sweat. That is Mshwari for you.

For the past week, however, this ambitious product has come under the attack of some quarters. This quarters who base their claims on misconceptions have been painting the product in bad light. 

Looking at the arguments given by these quarters, what comes out is a series of misconceptions, misinformation, innuendos as well as unfounded truths.

Two major misconceptions on Mshwari have been revolving around interest rates and time value of the money.

What people need to understand is that the interest rate of 7.5% is a one off rate that is levied upon the disbursement of the Mshwari loan and comparing with other products on the market, it is quite different while the time frame is 30 days or one month.

What is the difference between interest rate and facility fee? 

These are the two issues that are leading to misconceptions. First, interests rate and facility fee are two different things and they are not related in any way even by definition. Those using one to justify the other are misleading the people.

Take the same case of Mshwari, for instance, interest rate follows the concept of value of money and earns the lender an increasing return over time, for as long as the loan is outstanding. Let us say you took the money, the terms and conditions dictate that you repay the money within thirty, paying the full amount within the period with the extra 7.5 percent in this case settles the loan. However, if you fail to pay within the stipulated time, the the amount increases.

Facility fee on the other hand is a return the lender earns from the activity arranging credit. The fee is charged as either absolute or relative amounts. The two terms are quite different.

According to established facts, the truth about Mshwari is as follows:

• More than 420,000 loan applications are sent every day.
• More than 70,000 loans are processed every day.
• Majority of the loans are within 30 days and
• The average loan amount is 3,200 shillings.

Some people are saying that Mshwari is yet to comply with the new banking Act signed into law by President Uhuru Kenyatta. 

The question is, are these claims true? The answer is no. The product increased its saving interest rate to 7.35 percent in line with the new law and this is an established fact.

When someone loudly argues that the product is bad, the question is how? If it was bad, why more than 420,000 loan applications daily? Why more than 16 million customers already subscribed and enjoying the fruits of the product?

Ask the mama mboga in the streets on how Mshwari has improved their lives, ask the bodaboda operators how the product has eased their lives, just look around you, look at your phone and the true story of Mshwari will unveli before you.

Economic analyst, Steve Biko Wafula had this to share regarding Mshwari:

But let us be factual. As an SME, accessing loans has become easier via mobiles than through walk in to the banks #MShwariLoans

— SokoAnalyst (@SokoAnalyst) September 20, 2016

Imagine going to a shylock to get KES 20K loan to buy goods to sell…what collateral will you leave? How fast would it be? #MshwariLoans

— SokoAnalyst (@SokoAnalyst) September 20, 2016

The Use of Mshwari in the Jua Kali Sector https://t.co/SPmBCdqEWO #MShwariLoans #SokoNews

— SokoAnalyst (@SokoAnalyst) September 20, 2016

If we understand the risks a bank like CBA has on #MShwariLoans then we would appreciate how far we have come in affordable loans

— SokoAnalyst (@SokoAnalyst) September 20, 2016

I am not endorsing CBA in any way but let us give credit where it is due. This bank has actually, more than any other bank managed to drive the concept of financial inclusion in Kenya to the next level with more than 19 million people saving with it. There is no need of going back to the benefits of Mshwari, apart from the above mentioned, others are as clear as fresh water for everyone to see.

Instead of blasting the institution, we should be supporting it in the initiatives put in place for the betterment of our economy.