Safaricom Ltd is launching a mobile money based credit scheme, M-Shwari, a product that will allow M-Pesa subscribers to save and borrow money using their phones. This new product will mainly target micro-savers and borrowers. It will enable users to open a mobile bank accounts, into which they can deposit as low as KES 1 (Bob Moja tu) in savings and borrow up to KES 100,000 payable with a one-off interest rate of 7.5%, which will be payable within one month of disbursement.

This product possibly spells doom and bad business for shylocks. According to the Business Daily, though the 7.5% interest looks competitive compared to interest charged on commercial bank loans, that advantage is severely eroded by the one-month lending period that will mostly require borrowers to pay a lump sum amount to settle the debt compared to smaller monthly installments paid by those who borrow from commercial bank.

Appears like this is a product for people who are financially stuck temporarily and need to sort out a matter urgently before they can recover within a month.

Meet Matakwei

Matakwei runs a grocery store in Kawangware. He needs to restock his store by having his order of groceries delivered from Molo. However, Matakwei has nothing in his wallet (because of good or bad reasons) to make the purchase. What he knows is, by the time the month end,s he will have made more than KES 60,000. He then borrows KES 20, 000 on M-Shwari and places his order of groceries. Matakwei's business is running again and at the end of the month, he pays back KES 21,500 to M-Shwari, having made his target profit of KES 60,000; and takes home his KES 38, 500.

No, Matakwei doesn't exist, although there are probably several grocery markets in Kawangware. But you can see what Safaricom was going for with this product now, can't you?