A new mobile-based loan service targets fast-growing small and medium-sized enterprises in Kenya, which led to the injection of loan funds of Kenyan banks.
A total of $97 million loans was issued for the mobile-based lending scheme. The idea came after the success of the telecom operator Safaricom M-Pesa platform, which immediately garnered 100,000 customers. About 100 million Kenyan shillings were released for loans and are looking to lend 10 billion shillings more for the next phase.
The M-Pesa platform, known as Stawi, is backed by major banks in Kenya, including KCB Group, NCBA Bank, Cooperative Bank of Kenya, and Diamond Trust Bank.
According to Stawi, businesses can borrow between 300,000 shillings and 250,000 shillings, at an annual interest of 9 percent. This interest rate is equal to the central bank rate, which has repayment periods of up to 12 months.
In order to assess the creditworthiness of borrowers, the mobile-lending platform will use customer transactions to generate reliable data.
Banks such as the KCB and NCBA will enter the M-Pesa platform to offer personal lending and savings on mobile phones. With this new scheme, businesses can get access to the credit they need to expand and operate. For years, these SMEs complained about the lack of access to credit due to higher interest and lenders thinking they are too risky.
The Kenya government has imposed a rate cap in 2016, which led to the shutting down of lending funds to almost 1 million customers. The reason for the cap is to avoid the risk that could potentially affect the economy of Kenya. However, analysts believe that with this new funding, more small and medium-sized businesses can grow.
Since the application of the rate cap, the lending for SMEs dropped by 1.9 trillion. Kenya businesses started to drop too, generating no new jobs.
