Co-op Bank now joins competition for mobile money with launch of service

Co-operative Bank has launched its own mobile banking service that allows customers to take out loans through their phones, in a direct challenge to Safaricom’s M-Shwari and Equity Bank’s yet-to-be-launched lending system.

The Nairobi Securities Exchange-listed bank this week unveiled M-Co-op Cash, a mobile-based platform offering small loans, account opening, utility payment, funds transfer, airtime top-up and cash withdrawal services through mobile phones.

Co-op is banking on the mobile service to grow earnings from transaction charges as M-Co-op Cash will levy a one-off 7 per cent fee for secured personal loans of between Sh100 and Sh200,000 repayable within 30 days.

“The mobile wallet will be a significant boost to the bank’s performance on non-funded income,” said Dr Gideon Muriuki, Co-op Bank managing director.

ONE-OFF FEE

M-Co-op Cash will offer a range of mobile-based credit disbursements such as business loans that will attract a similar one-off fee of 7 per cent and salary advances and unsecured loans at 10 per cent, all repayable within a month.

“It enables both customers and non-customers across all networks to open bank accounts, apply for loans straight from their mobile phones and also make cash and utility payments,” he added.

M-Co-op Cash is seen as a direct competitor to M-Shwari, a joint mobile banking product run by Safaricom and Commercial Bank of Africa (CBA) that allows M-Pesa customers to save and borrow small loans through the phone.

Loans borrowed through M-Shwari are payable within 30 days and attract a 7.5 per cent one-off fee.

Equity Bank has said it plans to offer short-term loans to its customers at an interest rate of between 1 and 2 per cent a month. The bank said the lowest amount one can borrow through the phones is Sh500, while the maximum will be pegged on one’s credit score and history.

The minimum amount subscribers can borrow on M-Shwari is Sh100 while the upper limit is dependent on a user’s loan limit, previous loan repayment behaviour and usage of other Safaricom services such as voice, data and M-Pesa.

Co-op Bank’s mobile phone-based loans will be pegged on customers’ savings in the mobile wallet, borrowing history and number of transactions carried out on M-Co-op Cash.

Co-op will offer business loans of between Sh5,000 and a ceiling of Sh50,000; while unsecured personal loans will range between Sh100 up to a maximum of Sh2,000.

DIVERSIFY EARNINGS

Mr Muriuki said Co-op Bank was turning to alternative delivery channels to cut dependence on interest income and diversify earnings by generating fees.

The bank’s non-funded income — mostly fees and commission from mobile and Internet banking, ATMs and agencies — grew by more than a third or 38.7 per cent to Sh6.2 billion in the half-year to June.

Co-op Bank said it will ride on its customer base of 4.6 million accounts and network of 550 affiliated saccos to push uptake of the service.

M-Shwari, launched in November 2012, saw its active subscriber base grow to 3.6 million as at March 2014. Its deposit base had grown to Sh4 billion as at end of March.

It issued an average of Sh1.2 billion worth of loans per month in the year to March 2014, compared to Sh300 million a month the previous year.

M-Shwari’s volume of non-performing loans is at 2.7 per cent, debunking the perception that mobile-based micro-lending is risky.

— This story was first carried in the Business Daily on Friday