M-Shwari in Kenya: How is it Really Being used?

In recent years, Safaricom has launched a number of value-added services through its M-PESA product in Kenya, aiming to move its customer base beyond basic money transfers. M-Shwari, a savings and loan product launched in November 2012, is by far the most popular of the offerings. Fifteen percent of all active mobile money account holders (those with a registered mobile money account which they have used in the last 90 days) have used M-Shwari. But how are customers using it, and how do they perceive its uses and benefits? A recent nationally representative survey that InterMedia conducted in Kenya reveals some unexpected results.

Despite M-Shwari’s design as a savings and loan product, only 30 percent of survey respondents who had used the product reported taking out a loan, and just 14 percent said they have saved money with it for a future purchase or payment. (Note: The survey specifically asked about savings “for a future purchase or payment,” which likely impacted these findings. The possibility of alternative savings purposes is discussed below.) After accounting for overlap, only 39 percent reported using M-Shwari for either a loan or for this type of goal-driven savings.

Photo by Jay Bendixen

So how are the majority of M-Shwari users engaging with the product? Depositing and withdrawing top the list: 72 percent reported depositing money with M-Shwari, and 45 percent reported withdrawing money.

The high deposit rate, combined with the much lower use of loans, is corroborated by supply-side figures from Safaricom. The company reports that since M-Shwari’s launch, customers have deposited an aggregate of KSh24 billion (US$278 million) into M-Shwari accounts, while a much smaller KSh7.8 billion (US$92 million) has been loaned out through M-Shwari. The survey findings suggest a few hypotheses about how M-Shwari users view the product and how they might prefer to use it.

Customers may be using M-Shwari for short term storage of money rather than long term savings. The survey response, “save money for a future purchase or payment,” implies medium- to long-term savings. Instead, users may be treating their M-Shwari account as a liquid savings account of sorts, a place to store little bits of money as it comes in, with the intention of withdrawing it when it reaches a certain amount, or at a certain time.

M-Shwari users may also be saving for other long-term purposes, such as having money on hand in case of emergency. The high number of people reporting deposits, and the lower percentage reporting withdrawals, could point to this option.

Another possibility is that users are making deposits specifically for the purpose of accessing loans. In order to qualify for a loan M-Shwari users must make an initial deposit into their M-Shwari account. One theory is that users may have done so and been unsatisfied with the loan size offered and therefore not taken out a loan. This could explain part of the mismatch between the large percentage of M-Shwari users who have deposited money, and the smaller percentage who have taken out a loan.

In addition, research by MicroSave a few months after M-Shwari’s launch showed that some users were testing the system, making many deposits and withdrawals in an effort to impact the credit-scoring algorithms to try and achieve approval for a larger loan size. These efforts were somewhat misguided; while deposits impact loan size, anecdotal evidence shows depositing more money does not directly lead to larger loans. Nonetheless, InterMedia’s survey findings could indicate that users have continued this practice.

These survey findings demonstrate that we cannot assume customers are using a mobile money product in a particular way. To try and get to the bottom of how M-Shwari users view and use the product, InterMedia will be conducting a follow up study with survey respondents. Better understanding will provide insight into customers’ financial behaviors and needs, and identify opportunities for M-Shwari and future value-added products to improve upon existing options to meet those needs.



11 April 2014 Submitted by Stuart Rutherford (not verified)

The proposed follow-up study is important and I look forward to its findings.If it turns out that users are frequently lodging small amounts of money for short periods of time, and withdrawing frequently, that will indicate a major breakthrough for phone money, because it may be the first big example of people using phone money for one of the most vital money-management behaviours for poor people - managing money 'day-to-day' by keeping aside enough reserves to make sure there's food on the table every day and not just on days when there's income, or enough to take a child to a clinic to get an antibiotic for a infected eye when it's needed and not just when it's affordable. I'm excited.

17 April 2014 Submitted by Jonathan Petrides (not verified)

Hi Stuart - you're absolutely right, my hypothesis exactly!

The majority of users we've spoken with are appreciating the fact that (1) they have a slightly less liquid (but just as easy to use) mobile wallet, so will move money out of their mPesa to break-up balances and tuck some money aside for day-to-day unexpected needs (2) also the fact that this is yielding a small interest rate, while mPesa does not, is driving more positive depositing than I'd have initially expected... smart money management made easy through your phone. Simple savings tools = better lifestyle. Very exciting!

22 April 2014 Submitted by Sgarika Indu (not verified)

Very good study indeed. My question is this M-Shwari services really addressing the extreme poverty? Do the Extrem poor has access to the mobile services in Kenya ? I am also looking forward the proposed study findings.

06 August 2015 Submitted by dimwands (not verified)

i think that the interest given when yu save is alil bit low as it will be almost the amount charged for withdrawing it frim MPESA agent hence its exactly ur money which yu deposited that yiu get.

23 October 2016 Submitted by Akhand Tiwari (not verified)

Credit definitely never looses interest - people initially like it and sooner we start wondering of issues of over-indebtedness... I wanted to understand how people are now using Mshwari, after these many years of launch and presence of competitors (Eazzy/KCB) in the market. Also a follow up study will be very useful in unpacking people's money management practices especially with respect to products like M-Shwari.

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