Bella Genga

Kenyan lender CBA to take mobile-bank service deeper into Africa

A Kenyan lender that transformed from an also-ran into the country’s biggest deposit-taker, mainly through a mobile-phone banking service started four years ago, plans to use the product as a beachhead to expand outside its East African home base.

Commercial Bank of Africa Ltd., which also has units in Tanzania and Uganda, is seeking to export its M-Shwari mobile-phone service as part of a strategy to eventually have operations in 16 African countries, Chief Executive Officer Isaac Awuondo said. Rwanda is the “most immediate market” for the business, which was developed in 2012 with Safaricom Ltd., Kenya’s largest telecommunications provider, he said.

“Based on partnerships, we see it growing beyond the boundaries of East Africa, hopefully in the next year to 18 months,” Awuondo said in an interview in the Kenyan capital, Nairobi. The lender is also looking to make a foray into the Democratic Republic of Congo, where it has expressed interest in buying a struggling bank.

The closely held lender’s expansion drive comes after Kenyan President Uhuru Kenyatta last month signed into law rules setting a cap on commercial lending rates and a floor on deposits, which Awuondo estimates will cut earnings at the country’s banks by as much as 20 percent over the course of the next year. CBA is also reviewing the way it charges fees on loans provided through M-Shwari after coming under pressure from customers and competitors, he said.

‘Tighten Offering’

“We want to tighten the offering,” Awuondo said, declining to give more details. While M-Shwari charges no interest, it levies a 7.5 percent fee on 30-day mobile-phone loans, with approval from the central bank to go as high as 10 percent. CBA may have to no option but to shut down the service if it were forced to switch M-Shwari to an interest-rate model as the fee helps the bank cover all its costs, Awuondo was cited by Nairobi-based Internet news service Standard Digital as saying.

The mobile-banking service has helped CBA boost the number of Kenyan customers with deposits to 13 million from less than 1.1 million accounts in 2012. CBA now has 21.5 million customers across Kenya, Tanzania and Uganda, with 26,000 new customers being signed-on daily in the three countries, Awuondo said.

CBA disbursed 40 billion shillings ($495 million) worth of mobile-phone loans in 2015, with a non-performing loans ratio of 1.98 percent, and compared with 17 billion shillings in 2014, when the lender had 9.2 million customers. Awuondo sees 20 percent to 25 percent year-on-year growth in Kenya alone.

“We have up to 400,000 applications every day and at normal times of the month between 70,000 and 80,000 loans are issued every day,” he said. “Already our disbursement levels are actually at about 20 percent or 30 percent higher than they were last year.”


– Bloomberg