Mobile credit and savings services gaining traction using different models

As I write this blog post, I am at the MasterCard Foundation Symposium on Financial Inclusion 2014. There has been a lot of chatter around mobile credit and savings services and I thought this is a good time to look at the constantly changing landscape and the different models. Additionally the MMU team is building a deployment tracker, similar to our mobile money deployment tracker, and welcome you to send us more details on mobile credit and savings services.

Mass-market short term loans approach:

  • M-Shwari, launched in 2012 by Safaricom and Commercial Bank of Africa, is the most famous mobile credit and savings service. In their annual results announcement, Safaricom reported 3.6m active customers as of March 2014, who  have collectively deposited 4.0 billion KSh (46.3 million USD) and their loan balance stands at 1.2 billion KSh (13.9 million USD)[1]. In comparison, the figures released in September 2013 reported 2.4 million active customers, who  had collectively deposited 1.8 billion KSh (21.0 million USD) and their loan balance stood at 800 million KSh (9.3 million USD)[2]. In six months, the active customers have grown 67% and non-performing loans have dropped from 3.8% of the portfolio in September 2013 to 2.7% in March 2014, which is a good sign for the industry that their customer due diligence and credit scoring algorithms are working well.
  • Mjara loans, launched in April 2014 by MFS Africa, is a mass-market mobile money-based loan product that builds on the company’s existing KwikAdvance salary-advance loan product. The service is available to all MTN Mobile Money users in Ghana, and will be extended to other mobile networks later this year.
  • M-PAWA, launched in May 2014, is looking to replicate the success of M-Shwari as Vodafone group and Commercial Bank of Africa extend their partnership to Tanzania. The service has shown early promise, reporting 250,000 registered customers after the first three weeks with over 50,000 customers collectively depositing 1.2 billion TSh (1.0 million USD)[3].

The traditional microfinance institution approach:

  • Musoni, launched in 2013 (Musoni Services was spun off from Musoni MFI which was started in 2010), have built an independent business that provides their technology platform and mobile applications to ten microfinance institutions (MFIs) in Africa. The Musoni system has already been integrated with M-PESA (in Kenya and Tanzania), Airtel (Kenya) and Payway (Uganda) and four of Musoni’s MFI partners now accept mobile repayments (the remaining five are in the process of training their clients or setting up the partnerships with the MNOs). Importantly all ten MFIs use mobile technology to provide loans, creating efficiencies and helping build scale. At the end of 2013, Musoni reached a major milestone – processing a total of one million M-PESA transactions.

Specific segment approach, looking at their business models a whole different way:

  • Kiva Zip, launched in 2011, provides microloans to entrepreneurs in Kenya with 0% interest and no fees. The person-to-person lending platform has given out over 3,000 loans in total funded by 20,000 people.
  • Zoona, launched in June 2012, targets micro & small enterprise (MSE) distributors, agents, and retailers in Zambia with two core products to help them transact with corporate suppliers. Zoona offers affordable and accessible working capital financing packages linked to customer usage and growth of Zoona Payments. MSE distributors, agents, and retailers powered by Zoona may pre-qualify for Zoona Growth, and can access larger facilities as their payment volume grows.
  • Kopo Kopo Grow, launched in May 2014, provides merchants with a cash advance service to replenish stock, refurbish their premises, or launch a new business line. Repayments are based on electronic sales, and Kopo Kopo Grow perfectly aligns with a business’s cash flow: Kopo Kopo deducts a larger amount when sales are high, a smaller amount when sales are low, and no amount when there are no sales.

M-Shwari continues to impress with strong growth, which seems to have spurred the launch of new mobile credit and savings services, all of which focus on financial inclusion. As this industry gains traction, we at MMU will continue to track and monitor the progress of these services and the different models they use. Last week we launched the 2014 Global Adoption Survey for Mobile Financial Services, and we welcome your participation, especially if you offer a mobile credit and savings service. Please email [email protected] with the name of your service to obtain the survey.