“The mobile-based credit scheme is set to improve access to credit for small and mid-size enterprises, which have been locked out of the formal credit market because of the informal nature of their records and lack of collateral for secured loans.”
Customers will be able to access anywhere from Kshs. 30, 000 to Kshs. 250, 000 unsecured loan via a mobile phone application. The repayment period will range from 1 – 12 months at an interest rate of 9 percent per annum.
Customers, via the mobile app, will be scored and advised about their credit and eligible for a top-up functionality upon 80 percent loan repayment or after a 3-month track record of repayment.
Speaking about the revolutionary product during the pilot phase launch of the product to informal traders at the Gikomba marketplace, the CBK Governor, Patrick Njoroge said:
“Until now, lending to MSMEs has been constrained by the lack of reliable information to assess their creditworthiness. The innovation of this product is the use of all data on customers’ transactions to fill this gap. In that sense, it is revolutionary.”
This is the first time we’re seeing a loan product with a single digit interest rate. It will be interesting to see if more banks like Equity Bank and Barclays Bank, join the bandwagon after the pilot phase, and if the service will reduce the influence of popular mobile loan services like Branch and Tala.