Does the rate Cap Really Apply to Mshwari Mobile Loans?

The Kenyan President few weeks ago signed into law a bill aimed at capping bank interest rates at 4% above the Central Bank of Kenya Rate (CBR). Since then, there has been confusion in regards to implementation on mobile based lending offered by banks & other financial institutions.

Since last week, M-Shwari (a product of CBA and Safaricom) has come under attack from the Consumers Federation of Kenya (COFEK) as well as competitors, who claim that the product should be subjected to the Kenya Banking (Amendment) Act, 2016.

COFEK argued, “The law is clear that it applies to all loans. Whether offered directly or indirectly, any loan from a licensee of the Central Bank of Kenya via an agent and or mobile phone or any other technology is not exempt from the 4 per cent over and above the Central Bank Rate.”

Well, it seems most people really did not understand how this type of product works. Mshwari is a 30 Day loan which does not charge any interest . However, the only cost to the borrower is a one-off facilitation fee of 7.5%, charged at disbursement.


Facility fees in the case for M-Shwari is a return the lender earns from the activity of arranging credit. Fees are charged as either absolute amounts or relative amounts. Given the short term nature of the credit (30 days) and the fact that a customer can payback sooner (at any time within the 30 days), it is more appropriate to levy a fee over interest.

Since its inception in November 2012, stats show that over 420,000 loan applications are made every day with majority of the application being made at around 3a.m to 5 a.m. A clear indication that those who use the product are small business people who are in need of working capital to purchase goods to resell during the day. Of the 420, 000 applications, Mshwari processes about 70,000 loans and a majority is repaid within 30 days with some borrowing and repaying up to 7 times a day.

Interest Rates; 

Interest on the other hand follows the concept of time value of money and earns the lender an increasing return over time, for as long as the loan is outstanding. As such, interest is quoted per defined period either as per annum (over 12 months) or per month, etc. M-Shwari loans charge a one off facility fee of 7.5% against the amount disbursed, irrespective of the repayment duration.

From the statistics above, a significant number of Mshwari users are low income earners who usually use the product on a regular basis for economic gain. Since its inception, many traders have been able to access the less expensive credit facility leading to growth of a number of small businesses.

Looking at other alternative products in the market, they are more expensive with some charging upto 30% fee on a tenor of 30 days compared to Mshwari’s 7.5% over the same tenor. Have a look at some of the competing products to Mshwari & the fees charged;








30 days

21 days

30 days

30 days

7 – 30 days

Competitor products (foreign)


Comparisons: CBA Mshwari vs Equity’s Eazzy Loan and KCB Mpesa

Eazzy Loan by Equitel / Equity Bank

Terms and conditions:–Conditions.pdf

  1. TarrifsScreen shot 2016-09-20 at 11.40.12 AM.png
  1. CRB ListingScreen shot 2016-09-20 at 11.40.30 AM.png

KCB Mpesa

Terms and Conditions:

  1. Tariffs for KCB Mpesa loanScreen shot 2016-09-20 at 11.41.37 AM.png
  1. If you do not pay..Screen shot 2016-09-20 at 11.41.49 AM.png
  1. CRB ListingScreen shot 2016-09-20 at 11.42.05 AM.png