Kenya: Five banks unveil mobile loan product to target small, medium-sized enterprises

Five commercial banks in Kenya has recently unveiled the pilot phase of a mobile loan product targeting micro, small and medium sized enterprises.

The loan product, marketed under the name Stawi, will initially be managed by Commercial Bank of Africa Limited, the Cooperative Bank of Kenya Limited, Diamond Trust Bank Kenya Limited, KCB Bank (Kenya) Limited and NIC Group PLC.

The governor of the Central Bank of Kenya, Patrick Ngugi Njoroge opined that the mobile-based credit scheme is set to improve access to credit for small-to-mid-size enterprises that have been locked out of the formal credit market because of the informal nature of their records and lack of collateral for secured loans, Xinhua noted.

"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," Njoroge said during the launch of Stawi in Kenya's capital, Nairobi. He cited that the cooperation between the five banks will allow them to reach out to a growing number of small enterprises, promoting job creation and income generation, with a multiplier effect on the economy.

On the other hand, Stawi offers unsecured loan products ranging from 30,000 Kenyan shillings (300 U.S. dollars) to 2,500 dollars with repayment profiles of one month to 12 months, at an interest rate of nine percent per annum. Njoroge said that this facility responds to the unique financing needs of MSMEs. He also emphasized that the sector is vital to the Kenyan economy, and the product could not have been launched at a more opportune time, as reported by Xinhua.

The pilot phase will be 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.