Research & Analysis

How M-Shwari Works: The Story So Far

“Shwari” means calm in Kiswahili, yet M-Shwari, a bank account offering a combination of savings and loans, has taken the Kenyan market by storm. Offered as a collaboration between the Commercial Bank of Africa (CBA) and mobile network operator (MNO) Safaricom through its ubiquitous mobile money service M-PESA, M-Shwari has piqued the interest of mobile money watchers looking for the next innovation to drive financial inclusion globally. M-PESA is rightly lauded as a global success story: It is used by two-thirds of Kenyan adults, has more than 80,000 agents, and processes nearly $20 million in daily payment transactions. Yet M-Shwari represents the next frontier of digital financial services as it demonstrates that mobile money infrastructure can be leveraged to offer higher value financial products at scale. M-Shwari has already brought millions of poor, previously unbanked Kenyans the full benefits of a banking product (including interest, deposit insurance, and access to credit) using M-PESA’s unparalleled mobile money infrastructure. M-Shwari is also the first large-scale product that taps into digital information (in this case, telecommunication data) of poor and unbanked customers in an emerging market to make credit-scoring decisions. 

At the heart of this success is a product that emulates the way low-income Kenyans manage their money. Kenyans constantly balance the need for short-term liquidity with providing a return for the future. The M-Shwari product allows customers to save for the short term while also increasing access to credit options in the future, which makes customers feel that their funds are “working” for them. In addition, the product is easy to figure out and highly engaging as it rewards customers for “good” behavior quickly. The fast, virtual nature of the product does exacerbate the usual challenges of customer education and disclosure but represents an unprecedented new channel of access to short-term loans and secure savings for a swathe of the population who has not had previous access to formal financial services.