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The initial concept of M-PESA was to create a service which would allow microfinance borrowers to conveniently receive and repay loans using the network of Safaricom airtime resellers.[17] This would enable microfinance institutions (MFIs) to offer more competitive loan rates to their users, as costs are lower than when dealing in cash. The users of the service would gain through being able to track their finances more easily. When the service was piloted, customers adopted the service for a variety of alternative uses and complications arose with Faulu, the partnering MFI. In discussion with other parties, M-PESA was re-focused and launched with a different value proposition: sending remittances home across the country and making payments.[17]

They make too much money on lending. The fundamental tenet of lending is that your interest rate should be representative of the risk of the loan. If I'm not sure whether you, the borrower, will pay me back, then I'm going to charge you a high interest. Now, if you pay me back over successive loans and I seem pretty comfortable that you're not a thief, then I can start lowering the interest rate.

The head of M-Pesa, Sitoyo Lopokoiyit, says that they use over 3,500 features in credit decisions; but M-Pesa still charges everyone the same rate/fee. If the interest rate doesn't reduce over time, it means M-Pesa either doesn\u2019t know how to use the information or they're charging the same price irrespective of risk.

It's like your insurance company charging the same premium to an 18-year-old newbie driver and your accident-free auntie who's been driving for 16 years. Something's off, right?

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There has been limited product innovation given M-Pesa\u2019s data trove. All the innovation I have seen post the initial payment product has been around loans and overdrafts and you already know how I feel about that. As an example Kenya\u2019s insurance penetration was still at 2.2% of GDP in 2021, the third lowest in Sub Saharan Africa.

Transaction & loan data are amazing predictors of income and risk behaviour so I am surprised an innovative insurance offering has not been developed since 2007. Or other products that are a bit more involved than payments. This is not too underestimate the difficulty in getting payments right. But from where I sit, product innovation has been driven by the maxim \u201Cwhich other bank wants to get in on the act\u201D and \u201Chow can I make up for declining voice / data revenue\u201D.

Anastasia,

Thank you for pushing a bit further on the VAS', which are only going to become more important on these types of delivery channels. I would wonder if part of the issue why lower income use M-Shwari less is that the loans are very small if you save only a small amount, and the savings side of this product is emphasized as much in consumers' minds as the borrowing side. I think the marketing of M-Pawa in Tanzania has moreso emphasized the savings element, so I wonder if there may be greater uptake by consumers who don't have enough money to save to borrow in significant amounts, or just want a secure savings vehicle more than they do a loan product. Or, another idea is it could be as simple as the less money you have, the less money you have available to save, hence lower use of M-Shwari to store value by lower-income populations even if it is attractive in theory. What we really need here is to know how much M-Shwari is displacing other savings or credit products used by these households.

Rafe

Safaricom has unveiled a zero-interest credit service that will allow millions of its customers to shop for goods up to Ksh100,000 (approximately $846) and pay later in a move that is set to disrupt the mobile loans market.

Faraja promises to be a game-changer in the mobile loans market and is set to undercut the costlier credit products including its own Fuliza, KCB-Mpesa, Mshwari as well as digital credit providers such as Tala, Branch and Zenka.

Innovation: Beyond its financial achievements, M-PESA has paved the way for future innovations in the fintech landscape, a key factor in successful global acceptance. Recognizing mobile money's potential, Safaricom continues exploring new technologies to expand M-PESA's offerings. The platform has evolved into a comprehensive financial ecosystem, integrated with services such as loans, insurance, and investments, setting the pace for competitors. This is evident in MPESA services such as overdraft service Fuliza and savings and loan services Mshwari and KCB MPESA, among others.

In addition to the link-up with Timiza, Safaricom offers loans under the KCB m-Pesa brand, which competes with a number of other micro-finance providers in the country including Airtel Money brand M-Fanisi.

If I have more than one registered mobile number, can I register for more than one Mco-opcash account and apply for several loans? You can register more than one MCo-opcash account, but you can only take one MCo-opcash loan at a time.

"What stands out in the international markets is the nano-lending part, which is now becoming bigger and bigger. There have been $2.5 billion in loans extended, so that's been really good for us, and we have 18 million users using the product," he added.

Over the years M-Pesa has evolved to become more than just a payment platform and lately has seen success in Kenya through nano-loans product Fuliza. In July 2019, Vodacom launched a similar nano-loans product in Tanzania, called Songesha, which has already seen small loans of up to $30 extended to 5.3 million customers.

"If you look at what Songesha or Fuliza is doing it is very similar, except in the M-Pesa version the loans are for anything. If you run out of money when you're trying to buy something, we extend you a loan and we take it off later."

"On the nano-loans and the SME lending we don't take the bad debt risk. The bad debt risk is taken by the institutions providing it, but it's sold through our platform, and we take a revenue share from that," he said.

"We also have machine learning built into the back of these products so you can adjust the amount of loans that you are extending to particular customers based on their individual bad debt risks," he explained.

Meanwhile, Vodacom's business financing product for SMEs, VodaLend, is also gaining traction in South Africa and the company wants to take the product to its other African markets. VodaLend offers loans to SMEs from between R10,000 ($555) to R1.5 million ($83,400) which are repayable over 6-12 months.

The Hustler Fund Group loan product allows groups to apply for loans ranging from Kes 20,000 to Kes 1 million. The interest rate is 7% per annum on reducing balance and 1.5% default rate. The repayment period is six months from the disbursement date.

This is the second product of the Hustler Fund targeting registered groups with affordable and digitally accessible loans to spur economic growth within the identified priority sectors thereby boosting the post pandemic economic recovery efforts by the Government of Kenya while driving the culture of savings.

Any registered group with a minimum of 10 members engaged in common economic activity can opt into Hustler Fund Groups Microloans. The groups must possess activate registration certificate from the Micro and Small Enterprises Authority (MSEA).

You can access Hustler Fund Groups Microloans services on USSD channel. To create a group dial *254#, select Hustler Fund Microloans for groups and follow the prompt. Once you have created a group, you can invite members to join your group.

No. Once you are opted into one group, you cannot join another group to access Hustler Fund Microloans for groups. Similarly, you can access Hustler Fund with only one mobile number registered under your national ID regardless of the mobile network operator that registered you.

Only a group official can request for Hustler Fund Microloans on behalf of the group. This loan request shall be subjected to approvals from the other group officials (and two members). Once your group has been onboarded on Hustler Fund and assigned credit limit, a group official shall dial *254# and select Hustler Fund Microloans for groups to request for loan.

Moreover, accessibility to consumer credit has dramatically increased with the growth of mobile money systems. The M-Shwari system, conducted via M-Pesa, acts as a mobile banking facility that provides the functionality of a traditional bank, including loans. On a continent where credit access is extremely limited, especially for individuals in the dominant informal sector, M-Shwari is an extremely popular means of facilitating individual loans. Considering the lack of any credit history, or even known sources of income due to informal workers comprising around 83% of the economy, traditional banks are loath to provide loans of any size.

M-Pesa is able to aggregate information on its registered users as they use M-Pesa to make traditional payments for goods, restaurants, and other typical services. This accumulation allows for an informed credit decision. Safaricom has also begun to offer completely credit-free loans in which further access to capital is contingent on timely repayment of the current amount. Most notably, these loans allow individual Kenyans to develop businesses and make other value-added investments such as in education or sustained power access. Considering the well-documented effects of micro-finance in boosting individual economic growth and empowerment of traditionally marginalized groups such as women, M-Shwari is a key means of efficient provision of these services. 006ab0faaa