A consortium of five banks in Kenya has launched a new mobile loan product named Stawi, backed by the Central Bank of Kenya (CBK).
The Commercial Bank of Africa Limited (CBA), the Cooperative Bank of Kenya Limited, Diamond Trust Bank Kenya Limited (DTB), KCB Bank (Kenya) Limited, and NIC Group PLC will seek to extend credit to businesses that have been locked out of the lending market.
In a market that is flooded with micro lending apps, Stawi will differentiate itself by targeting micro, small and medium scale enterprises in Kenya.
CBK Governor Dr. Patrick Njoroge said, “Until now, lending to MSMEs has been constrained by the lack of reliable information to assess their creditworthiness. The innovation in this product is the use of all data on customers’ transactions to fill this gap. In that sense it is revolutionary.”
Stawi will charge 9% per annum. Traders will be able to access Ksh 30,000 up to Ksh 250,000 with repayment profiles of 1-12 months.
The pilot phase will be carried out in two weeks and will involve 3,500 traders in the MSME sector. The second roll-out will be to 10,000 traders, who will be registered by Stawi agents and will be involved in the second round of tests for the app.
This is the second interbank collaboration in the local FinTech space. PESALINK money transfer was the first to offer interbank money transfer outside the mobile wallets owned by telecom companies.
A report by Kenya Institute for Public Policy Research and Analysis (Kippra) in December 2018 outlined the growing mobile lending sector, saying its ease is attractive to both borrowers and lenders.
“The growing use of digital credit is fueled by the quick access to funds by the borrowers, zero collateral requirements, no paperwork by lenders, remote accessibility, and use of alternative credit scoring models such as mobile money transaction data to determine eligibility for credit,” it said.
However the interest rates charged is a huge disadvantage to the borrowers. “Established mobile loans applications such as Branch and Tala charge 14% and 15% monthly interest rates, respectively, which if standardised annually is 168% and 180%, respectively, way higher than the commercial banks’ average of approximately 13% per annum,” Kippra said.