M-Shwari was launched in 2012 as a revolutionary service aimed at promoting financial inclusion. By enabling M-PESA users to access savings accounts and short-term loans directly from their mobile phones, it has bridged the gap for many people who were previously excluded from formal banking services.
With over 30 million users, M-Shwari is one of the most widely used mobile banking services in Kenya, offering convenience, accessibility, and affordable interest rates. Here, we’ll focus on how M-Shwari’s savings interest rates work and how they compare with other financial products.
7 Key Facts About M-Shwari Interest Rates
1. Savings Interest Rate: Up to 6.3% Per Annum
One of the most attractive features of M-Shwari is its savings interest rate. M-Shwari offers a competitive rate of up to 6.3% per annum. Although this may not seem like a huge figure at first glance, what makes it stand out is the way the interest is calculated and compounded:
- Daily Interest Calculation: M-Shwari calculates your interest daily, meaning your money starts earning interest right away. This is an advantage over traditional savings accounts, where interest is usually compounded annually.
- Monthly Payout: The interest is paid to your account on a monthly basis, making it easier to track your earnings and see the growth of your savings.
Example:
If you deposit Ksh 10,000 into your M-Shwari savings account, assuming you get the full 6.3% annual interest rate:
- Daily interest = (10,000 * 6.3%) / 365 = Ksh 1.73
- After 30 days: You’d earn Ksh 51.90 in interest.
While this may seem small at first, remember that the compound effect works in your favor, and if you leave your money for a longer period, your returns will grow.
2. Loan Interest Rate: Flat 3% Per Month
M-Shwari’s loan interest rate is another key aspect of the service. If you need a short-term loan, you can easily access it through the M-Shwari app with a flat interest rate of 3% per month. This is applied to the loan amount and repaid within 30 days.
Loan Repayment Example:
| Loan Amount | Interest (3%) | Total Repayment |
|---|---|---|
| Ksh 1,000 | Ksh 30 | Ksh 1,030 |
| Ksh 5,000 | Ksh 150 | Ksh 5,150 |
| Ksh 10,000 | Ksh 300 | Ksh 10,300 |
Though the loan interest rate may seem high compared to traditional banks, it’s important to note that M-Shwari loans are designed to be short-term, so the overall cost is lower.
3. Additional Charges: What You Need to Know
While M-Shwari’s interest rates are clear and competitive, there are some additional fees and charges to be aware of, particularly for loans. These charges can impact your overall repayment amount:
- Facility Fee: 7.5% of the loan amount
- Late Payment Fee: 2.5% of the outstanding balance
- Excise Duty: 20% on fees and charges
For instance, if you borrow Ksh 1,000, you might incur:
- Loan amount: Ksh 1,000
- Interest: Ksh 30
- Facility fee: Ksh 75
- Excise duty on facility fee: Ksh 15
- Total repayment: Ksh 1,120
These additional charges should be factored into your decision when applying for a loan.
4. Locked Savings: Higher Interest Rates for Longer Commitments
M-Shwari also offers a special Locked Savings account, which allows you to earn higher interest rates for locking in your money for a fixed period. This is ideal for individuals who have savings they won’t need for a while and are looking for a better return.
Locked Savings Interest Rates:
| Lock Period | Interest Rate (p.a.) |
|---|---|
| 1 month | 7% |
| 3 months | 7.5% |
| 6 months | 8% |
| 12 months | 8.5% |
If you have extra cash to set aside, these higher interest rates can help your money grow faster.
5. Savings Behavior Can Impact Loan Eligibility
M-Shwari’s unique feature is the way your savings behavior can affect your loan eligibility. The more you save and the more actively you use the service, the higher your credit limit can become. Safaricom doesn’t disclose the exact formula used to determine loan eligibility, but consistent savings can unlock better loan terms and higher credit limits.
6. Comparing M-Shwari to Traditional Banks
If you’re wondering how M-Shwari stacks up against traditional banks, here’s a simple comparison:
| Service | M-Shwari | Average Traditional Bank |
|---|---|---|
| Savings Rate | Up to 6.3% p.a. | 3-5% p.a. |
| Loan Rate | 3% per month | 13-18% p.a. |
| Account Fees | None | Ksh 100-500 per month |
M-Shwari not only offers competitive rates but also eliminates the hassle of monthly account fees, making it a much more affordable option for many users.
7. Financial Inclusion and M-Shwari’s Impact
M-Shwari’s interest rates and mobile accessibility play a key role in promoting financial inclusion across Kenya. By providing easy access to savings accounts and loans, M-Shwari has helped millions of Kenyans who were previously unbanked or underserved by traditional banks.
The Central Bank of Kenya reports that mobile banking services like M-Shwari have contributed to a significant increase in financial inclusion, from 26.7% in 2006 to over 80% in 2023. This shift has allowed many Kenyans to manage their finances more efficiently and securely.
How to Maximize Your Earnings with M-Shwari
To make the most of your M-Shwari account, consider these strategies:
- Use the Locked Savings Accounts: If you have savings that you don’t need immediately, lock them away for higher interest rates.
- Save Consistently: The more you save, the higher your loan eligibility can become.
- Avoid Early Withdrawals: Withdrawing funds too soon can mean missing out on potential interest earnings. Plan your withdrawals carefully.
- Pay Loans on Time: This will not only save you from additional charges but can also improve your credit limit for future loans.
Is M-Shwari Right for You?
With competitive interest rates, easy access to financial products, and a simple, user-friendly interface, M-Shwari has become an essential financial tool for many Kenyans. Whether you’re looking to save, borrow, or simply manage your money more effectively, M-Shwari’s offerings are hard to beat in terms of convenience and affordability.
If you haven’t already, sign up for M-Shwari today and take advantage of the numerous benefits it offers. From competitive savings rates to flexible loan options, it’s a powerful tool for managing your financial life directly from your mobile phone.
Ready to start saving and earning with M-Shwari? Download the M-PESA App now and open your M-Shwari account. Get started today and watch your savings grow!
