• About Hisa Technologies
  • Advertise
  • Careers
  • Contact Us
  • Estate Cloud
Thursday, August 18, 2022
  • Login
  • Register
No Result
View All Result
NEWSLETTER
Kenyan Wallstreet
  • Home
  • News
    • Kenyan News
    • African News
    • Global News
  • Business
    • Agriculture
    • Banking
    • Aviation
    • Energy
    • Manufacturing
    • Markets
    • Technology
    • Startups
  • Money Matters
  • Podcast
  • Videos
  • Digital Assets
  • Calendar
  • Home
  • News
    • Kenyan News
    • African News
    • Global News
  • Business
    • Agriculture
    • Banking
    • Aviation
    • Energy
    • Manufacturing
    • Markets
    • Technology
    • Startups
  • Money Matters
  • Podcast
  • Videos
  • Digital Assets
  • Calendar
No Result
View All Result
Kenyan Wallstreet
No Result
View All Result

Does the rate Cap Really Apply to Mshwari Mobile Loans?

Kenyan WallStreetbyKenyan WallStreet
September 20, 2016
in Kenyan News
Reading Time: 4 mins read

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.

WHAT DO THE PHRASES “INTEREST RATES & FACILITY FEES” MEAN?

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;

BRANCHTALASAIDAGETBUCKS
Price

14%

11%

15%

7.5%

30%

Tenor

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

ADVERTISEMENT

Terms and conditions: http://ke.equitybankgroup.com/downloads/Eazzy-Loan-Terms–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: http://www.safaricom.co.ke/KCB-MPESA-Account/Terms_and_Conditions.pdf

  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

Previous Post

Mombasa port cargo up 1.4 pct in first half of 2016

Next Post

Kenyan Banks Under Pressure as Central Bank lowers CBR to 10%

Related Posts

CMA

CMA Reviews Credit Rating Agencies Regulations in Bid to Enhance Company Ratings

August 17, 2022
KAA

KAA Moves to Court after Airport Workers Issue Strike Notice Over Salary Delay

August 17, 2022

I&M Group Reports a 16% Rise in half-year profits to Ksh 4.9 Billion

August 17, 2022

Dollar Cost Averaging your Way to Wealth

August 16, 2022

Kakuzi Eyes Global Berries Market in New Partnership with Driscoll’s

August 16, 2022

William Ruto Wins Kenya’s Presidential Election

August 15, 2022

World Bank Seeks to Review Financing of Kenyan Healthcare Sector

August 15, 2022

Horticulture Earnings Fall by 42% to Ksh 48.4 Billion on Lower Volumes

August 15, 2022
Load More
Next Post
CBK Kenya Building

Kenyan Banks Under Pressure as Central Bank lowers CBR to 10%

ADVERTISEMENT

Follow Us

  • 143.8k Followers
  • 2.4k Subscribers
  • 1.2k Followers

WhatsApp

Subscribe

Telegram  

Subscribe

Podcasts

Upcoming Events

Aug
19
Fri
all-day Kapchorua Tea Kenya Payment of F...
Kapchorua Tea Kenya Payment of F...
Aug 19 all-day
Kapchorua Tea Kenya payment of a final dividend of kes 10.00 per share
all-day Williamson Tea Kenya Payment of ...
Williamson Tea Kenya Payment of ...
Aug 19 all-day
Williamson Tea Kenya Payment of final dividend of  Kes 20.00 per share.
Aug
31
Wed
all-day Safaricom Payment of Final Dividend
Safaricom Payment of Final Dividend
Aug 31 all-day
Safaricom payment of a final dividend of Ksh 0.75
Sep
15
Thu
all-day East African Breweries (EABL) Bo...
East African Breweries (EABL) Bo...
Sep 15 all-day
EABL Book Closure
Sep
16
Fri
all-day BAT Kenya Payment of Interim Div...
BAT Kenya Payment of Interim Div...
Sep 16 all-day
BAT Kenya payment of Ksh 5.00 interim dividend
View Calendar
Add
  • Add to Timely Calendar
  • Add to Google
  • Add to Outlook
  • Add to Apple Calendar
  • Add to other calendar
  • Export to XML

Featured

No Content Available

About Us

We are a leading integrated digital content platform providing in-depth business and financial news across Sub-Saharan Africa & the globe. Kenyanwallstreet.com is a property of Hisa Technologies Ltd, a financial media & software company.

Contact Us

Kenyan Wall Street
Email: [email protected]
Website: www.kenyanwallstreet.com

Disclaimer

The information contained in this website is for general information purposes only.
Read more..

  • About Hisa Technologies
  • Advertise
  • Careers
  • Contact Us
  • Estate Cloud

Copyright 2021. Hisa Technologies. All Rights Reserved.

No Result
View All Result
  • Home
  • News
    • Kenyan News
    • African News
    • Global News
  • Business
    • Agriculture
    • Aviation
    • Banking
    • Energy
    • Infrastructure
    • Insurance
    • Investment
    • Manufacturing
    • Markets
    • Public Policy
    • Real Estate
    • Startups
    • Technology
  • Podcast
  • Videos
  • Events

Copyright 2021. Hisa Technologies. All Rights Reserved.

Welcome Back!

Login to your account below

Forgotten Password? Sign Up

Create New Account!

Fill the forms below to register

All fields are required. Log In

Retrieve your password

Please enter your username or email address to reset your password.

Log In