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M-Shwari:
The Story So Far
April 2015
7 out of 10 Kenyans are active mobile money users:
8 out of 10 Kenyans live within 5km of financial access point:
Enter M-Shwari:
a savings and loan bank account
exclusively accessed through M-PESA
HOW M-SHWARI WORKS
Peace Osangir, Financial Risk Manager
Commercial Bank of Africa
What is M-Shwari?
 Mobile-based banking service provided by CBA through the Safaricom mobile channel.
 Product Offering:...
Highlights of Product Features
– Customer Promise
 Banking service that is accessible and convenient
 True partner to of...
HOW M-SHWARI
WORKS
How M-Shwari Works
8
Sec
Turn around time on
account activation
6
Sec
Turn around time on
transaction processing
Instant e...
CREDIT SCORING
Initial scorecard & Limit
Assignment
Customer
profile
Mobile
Money
usage
Telco
Airtime
data
Subsequent limi...
Value Proposition
11
11
LOW-INCOME KENYANS AND THE LIQUIDITY CRUNCH
Julie Zollmann, Principal Investigator
Kenya Financial Diaries
There’s not enough money.
Buy stock for
business
$30
Have
US$ 33
Need US$ 71
72% of Diaries households live on less than $...
Income is very volatile.
Median
household’s
income fluctuates
54% from
month to month.
If Average Income=
US$ 100
Good mon...
Short-term Liquidity
Longer-term
Investment
There are tradeoffs between stretching
and growing money.
Falling
Short on
Both
“We cannot sleep
hungry while
money is on the
phone.”
Money should be
working!
People use a whole range of financial
devices to stretch and grow.
Patrick
Jua kali artisan worker in Nairobi
who supports...
But they face a huge range of risks.
Temporary disability
Permanent disability
Chronic Illness
Hospitalization Outpatient ...
Savings in the house and social
networks help, but leave gaps.
Temporary_disabilityTemporary_disability
Permanent_disabili...
For example, in health, existing tool
box incomplete.
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
50000
Saving ...
Small, on demand credit can ease the
tradeoff between stretching and growing.
0
1000
2000
3000
4000
5000
6000
7000
0
2000
...
21
WHY M-SHWARI WORKS
Claudia McKay
M-Shwari Demographics: 2013
M-Shwari Demographics Shifting
M-Shwari offers easy access to small
amounts of liquidity in a way that fits how
low-income people think about finances.
“My son was bleeding a lot
from the nose and I was just
back from the market and had
used all of the money. I
needed $12 a...
Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think
about their fi...
Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think
about their fi...
Interviewer:
“The first time you were
activating M-Shwari, is there
anyone who did it for you?”
Edwin:
“Nobody! I just fol...
Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think
about their fi...
Easy, accessible and private
Simple and clear rules
Highly engaging
Matches the way low-income people think
about their fi...
Challenges of Transparency and Disclosure
Visit
www.cbagroup.com/
m-shwari
www.Safaricom.co.
ke
OK Back
Terms and
conditio...
Why is M-Shwari important beyond Kenya?
First large-scale loan product using a
person’s telecom data to make initial credi...
Why is M-Shwari important beyond Kenya?
First successful bank account layered on a
mobile wallet used by majority
Demonstr...
Advancing financial inclusion to improve the lives of the poor
www.cgap.org
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M-Shwari: The Story so Far

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M-Shwari is a savings and loan bank account exclusively accessed through M-PESA.

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M-Shwari: The Story so Far

  1. 1. M-Shwari: The Story So Far April 2015
  2. 2. 7 out of 10 Kenyans are active mobile money users: 8 out of 10 Kenyans live within 5km of financial access point:
  3. 3. Enter M-Shwari: a savings and loan bank account exclusively accessed through M-PESA
  4. 4. HOW M-SHWARI WORKS Peace Osangir, Financial Risk Manager Commercial Bank of Africa
  5. 5. What is M-Shwari?  Mobile-based banking service provided by CBA through the Safaricom mobile channel.  Product Offering: Banking products that provide convenience, reliability and cost- effectiveness for making micro-savings and taking micro-loans.  Target market: All M-PESA customers; to enhance the M-PESA value proposition, while aspiring to deepen Financial Inclusion in Kenya by offering a bank deposit and credit product.  Purely unsecured  High Volume, low value, high frequency transactions  Short term (1 month)  Services offered by M-Shwari…  Deposit:  Withdrawal: transfer from M-Shwari to M-PESA  Loan request  Loan repayment  Balance enquiry  Mini statement
  6. 6. Highlights of Product Features – Customer Promise  Banking service that is accessible and convenient  True partner to offer better savings option in time of plenty and reliable help in times of need  We trust you with our money even before you trust us with yours  Credit offered/rejected discreetly, without much hustle  Your character counts. Deposit Features Credit Features No minimum balance requirement to open account Loan amounts range from USD 1 – USD 500 Electronic customer enrolment and account activation Loans offered at a 7.5% one-time fee for 30 days Defined KYC criteria and verification workflow Customer allowed to roll-over debt for another 30 days at a fee of 7.5% Deposit Limits defined for Tiered KYC Levels No compounding penalty interest for delayed payments Deposit insurance of up to a max. of KES 100,000 (USD 1,100) Customer information to be used for credit scoring No charges levied against account (no value erosion) Promote savings – credit strongly linked to savings profile
  7. 7. HOW M-SHWARI WORKS
  8. 8. How M-Shwari Works 8 Sec Turn around time on account activation 6 Sec Turn around time on transaction processing Instant electronic customer enrolment and account activation Electronic KYC verification Instant credit scoring and credit limit assignment
  9. 9. CREDIT SCORING Initial scorecard & Limit Assignment Customer profile Mobile Money usage Telco Airtime data Subsequent limit Adjustments Customer profile M-Shwari Product Usage Subsequent Limit increase DataSourcesScorecardDev Loan Performance • USD 339.4M in loan disbursement • 300 bps better NPL rate than industry average as at Dec 2014 Repayment Triggers • SMS reminders • Limit sanctions • CRB listing
  10. 10. Value Proposition
  11. 11. 11 11 LOW-INCOME KENYANS AND THE LIQUIDITY CRUNCH Julie Zollmann, Principal Investigator Kenya Financial Diaries
  12. 12. There’s not enough money. Buy stock for business $30 Have US$ 33 Need US$ 71 72% of Diaries households live on less than $2/day. Out of a monthly income of US$100, after absolute essentials, …
  13. 13. Income is very volatile. Median household’s income fluctuates 54% from month to month. If Average Income= US$ 100 Good month: US$ 150 Bad month: US$ 50
  14. 14. Short-term Liquidity Longer-term Investment There are tradeoffs between stretching and growing money. Falling Short on Both
  15. 15. “We cannot sleep hungry while money is on the phone.” Money should be working!
  16. 16. People use a whole range of financial devices to stretch and grow. Patrick Jua kali artisan worker in Nairobi who supports three sons with him and wife and kids upcountry Median HH=14 devices
  17. 17. But they face a huge range of risks. Temporary disability Permanent disability Chronic Illness Hospitalization Outpatient treatmentDeath of relative Death of main income earner Divorce, separation Loss of income source TheftAttack Legal case Eviction Fire Death of livestock Drought Crop disease0 10000 20000 30000 40000 50000 60000 70000 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% All Households Incidence & Severity Probability of Population at Risk Experiencing Event in One Year (%) by Median Cost of One Event (KSh) Frequency Low Frequency High Financial Impact Low Financial Impact High Module: 5 years Colors indicate population at risk: All household members Adults Households Households who owned livestock or cultivated land during Diaries
  18. 18. Savings in the house and social networks help, but leave gaps. Temporary_disabilityTemporary_disability Permanent_disabilityPermanent_disability Chronic_IllnessChronic_Illness HospitalizationHospitalization Outpatient_treatmentOutpatient_treatment Death_of_relativeDeath_of_relative Death_of_main_income_earnerDeath_of_main_income_earner Divorce,_separationDivorce,_separation Loss_of_income_sourceLoss_of_income_source TheftTheft AttackAttack Legal_caseLegal_case EvictionEviction FireFire Death_of_livestockDeath_of_livestock DroughtDrought Crop_diseaseCrop_disease savings_formal savings_cash savings_mpesa savings_moneyguard savings_chama borrow_chama borrow_family borrow_formal borrow_informal borrow_employer goods_on_credit accrue_arrears insurance welfare_group resources_received sell_asset work_more other 0-1 1-5 5-20 20-40 40-60 Heat Map of Coping Strategy by Shock Saving the house RR
  19. 19. For example, in health, existing tool box incomplete. 0 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000 Saving in house Social network Bank saving Chama saving Borrow from network Sell assets Sweet spots of financing for health Most common resources
  20. 20. Small, on demand credit can ease the tradeoff between stretching and growing. 0 1000 2000 3000 4000 5000 6000 7000 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 School Fees Payments and Aggregate Income, KSh Total income School fee payments Primary kids sent home Install electricity, buy tv Pay lots of school fees, still primary kids sent home for lunch/food Primary child sent home. Out of food from last harvest. Vivian sent home in Sept & early Oct. Misses several days of classes.
  21. 21. 21 WHY M-SHWARI WORKS Claudia McKay
  22. 22. M-Shwari Demographics: 2013
  23. 23. M-Shwari Demographics Shifting
  24. 24. M-Shwari offers easy access to small amounts of liquidity in a way that fits how low-income people think about finances.
  25. 25. “My son was bleeding a lot from the nose and I was just back from the market and had used all of the money. I needed $12 and that money helped a lot.” “I am in transport business. Not all the time do I have money so I can borrow money to help out my drivers when they are caught by the police.”
  26. 26. Easy, accessible and private Simple and clear rules Highly engaging Matches the way low-income people think about their finances 1 2 3 4 4 REASONS FOR HCD IMPACT:Why so popular?
  27. 27. Easy, accessible and private Simple and clear rules Highly engaging Matches the way low-income people think about their finances 1 2 3 4 4 REASONS FOR HCD IMPACT:Why so popular?
  28. 28. Interviewer: “The first time you were activating M-Shwari, is there anyone who did it for you?” Edwin: “Nobody! I just followed the procedure. When you go to M-PESA menu, there is M- Shwari. It is just logic.”
  29. 29. Easy, accessible and private Simple and clear rules Highly engaging Matches the way low-income people think about their finances 1 2 3 4 4 REASONS FOR HCD IMPACT:Why so popular? “All I do is just play with my money by moving it back and forth. I love to play that game between M-Shwari and M-PESA.”
  30. 30. Easy, accessible and private Simple and clear rules Highly engaging Matches the way low-income people think about their finances 1 2 3 4 4 REASONS FOR HCD IMPACT:Why so popular?
  31. 31. Challenges of Transparency and Disclosure Visit www.cbagroup.com/ m-shwari www.Safaricom.co. ke OK Back Terms and conditions read and accepted? OK Back
  32. 32. Why is M-Shwari important beyond Kenya? First large-scale loan product using a person’s telecom data to make initial credit decision How else can digital information be applied to poor and unbanked segments?
  33. 33. Why is M-Shwari important beyond Kenya? First successful bank account layered on a mobile wallet used by majority Demonstrating mobile money rails can be used to bring the unbanked into the formal banking sector
  34. 34. Advancing financial inclusion to improve the lives of the poor www.cgap.org

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