Mshwari Inside Out, Everything you need to know

I am sure you have heard all the buzz on the new banking service pioneered by CBA and Safaricom. The move has seen CBA break into the market at the bottom of the pyramid, a niche it had not explored before. I gave the service a try and here is a summary of my experience.

Setting up Mshwari on your phone

Step one: Update the Mpesa Menu

- Under the main Mpesa Menu, select 'my account' then select 'Update menu'. This will prompt you to enter your Mpesa password and after few seconds, the new menu is available and there is 'Mshwari'. 

Step two: Activating Mshwari

- Select Mshwari on the main Mpesa menu, and you will find only 2 items under it i.e 'Activate' and 'Terms and condition'. Select 'Activate'. This will prompt for your mpesa password again and may take longer as mshwari is experiencing a lot of traffic. never the less, you wait untill you receive an SMS confirming the activation.

Step three: Updating Mshwari Menu

- You will neeed to repeat Step one again to get the complete Mshwari Menu. If you have used other m-banking services such as m-kesho, you will find mshwari very similar; if you havent, it is still very simple for the average mpesa user.

So what is so good about Mshwari, The Pros

  1. No transaction charges. This is a winner for me. I happen to be a major m-kesho customer but I always lose 30 bob every time I withdraw from Mkesho to Mpesa. But now that is history. Am not saying I wont use mkesho any more, look at the cons below.
  2. CBA, This is a reputable bank and I feel safer knowing my money is in their custody than how I would feel if it was held by some of the other banks we know so very well!!??!!
  3. The loan. Wow, this is a killer. So many times I have found myself in need of some cash and no nearby ATMs. That is why I used M-kesho to transfer cash from Bank to Mkesho and then Mkesho to Mpesa. I can assure you this is a cumbersome process, the bank's m-banking services are based on USSD and have a very high failure rate, you have to retry like 5 times sometimes before it goes through. Now all I have todo is get that 1k loan on m-kesho which has an interest rate of only 7.5% flat rate.  This is disguised as loan processing fee to allow muslims to use the service, which is awesome since I would hate to see my muslim brothers miss out on this revolution. It is repayable within 30 days. There is a caveat here, some people have praised the service for a low interest rate forgetting that this is 7.5% per month which is equivalent to 7.5*12 which is 90% per year, definitely the highest in the market. Safaricom has clearly stated an extra 7.5% will be charged for every extra month (for loan defaulters)
  4. Money saved in Mshwari shall earn an interest rate of 5% per year, this not winner, but it is still  something, probably below inflation rate but still something.
  5. Those are enough reasons to use mshwari but reason number one deserves a repeat! No Transaction Charges.
Don't be so psyched here come the Cons
  1. 6 Months mpesa user requirement for you to qualify for the loan. This is a downer, I mean somebody just realized he could 'okoa mpesa' with mshwari and decides to vuka from airtel to safaricom and you tell them they have to wait 6 months. I understand safcom's fears but I wish they could throw more caution into the wind and use other methods like restricting loan limits based on your 'age' in safcom and usage statistics but not cutting you off completely.
  2. The high loan interest rate. 7.5% per month, that is 90% per year on a flat rate which is equivalent to 139% interest rate on a reducing balance. Some bloggers have praised it for been the lowest without doing the maths first. The highest loan rate in the market today is 27% per annum on a reducing balance.
  3. No ATM. What if you lost your phone and you were in need of some emergency cash (Why I will continue using m-Kesho). You will have to obtain a phone and replace your SIM card and restore Mpesa. This process is normally straight forward, but what if it is in the middle of the night and you are out of town. You only have your ATM with you. With Mkesho, I will just walk to the nearest bank and insert the VISA ATM card and access my mobile cash pap.

Loan Limits

Safaricom announced that limits will be based on usage of safaricom services. The initial loan limit is Kes 2,000. Note that you dont need to have money in M-Pesa or M-shwari account to get the loan. Based on you saving, borrowing and repayment trends, the limit will be revised from time to time hopefully upwards. I recently got a text message that my loan limit had been revised up to Kes 2,600.