The Central Bank of Kenya (CBK) in partnership with 5 major Kenyan banks, has launched the pilot phase of a mobile loan product targeting micro, small, and medium-sized enterprises in Kenya.
The loan product, dubbed Stawi, will initially be managed by five banks namely:
- Kenya Commercial Bank (KCB)
- Commercial Bank of Africa (CBA)
- Cooperative Bank of Kenya
- Diamond Trust Bank (DTB)
- NIC Group PLC
According to the CBK press release:
“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.”
The governor mentioned that bringing together the five banks helped bring the much needed capital to this segment of the market which employs over 80 percent of the Kenyan workforce.
The growing influence and demand of mobile loan services has been steadily on the rise in Kenya with most of the existing mobile loan products regarded as predatory due to their high interest rates.
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.