Telecommunication giant Safaricom has announced the introduction of an Excise Duty tax on the M-shwari loans before disbursement.

In an SMS to its customers on Monday, Safaricom said the deduction would effect on February 20, 2024.

“Dear customer, we wish to notify you that starting 20th February 2024, the Excise Duty tax due on M-Shwari loan facility fees will be deducted from your loan amount at disbursement,” the message read.

M-Shwari, a savings and loan service offered by Safaricom in partnership with NCBA bank allows customers to save as little as Sh1 and earn interest of up to 6.3 percent p.a. on their savings balance.

Through this service, customers access loans ranging from Sh1,000 to Sh50,000 payable within one month.

M-Pesa charges: Breakdown of amount of money Safaricom charges per transaction

The loans are charged at 9 percent where 7.5 percent is the loan fees while 1.5 percent is Excise Duty.

With the latest development, the Excise Duty will be deducted directly from loan disbursements meaning customers will receive their loan amount minus the excise duty.

For instance, if a customer borrows Sh1,000, they will receive Sh985 in their M-PESA account, with Sh15 being deducted as excise duty.

The tax is likely to affect the borrowing behavior of M-Shwari customers as they seek cheaper alternatives to meet their short-term needs.

In its latest sustainability report, Safaricom revealed that that the value of loans borrowed from M-Shwari increased 6.3 percent in  2023 to hit Sh91.5 billion up from the Sh86.1 billion booked in the previous year.

Recent disclosures by the Competition Authority of Kenya (CAK) indicate that M-Shwari tops the list of digital lenders in the country, controlling a 34 percent market share, and is closely rivaled by Safaricom’s Fuliza overdraft which enjoys a 25 percent market share.