Safaricom and the NCBA Group have developed a new loan pricing model that will see risky borrowers start paying higher M-Shwari charges.

The new model will see the M-Shwari loan product that is operated by the two companies start to give out loans in a similar strategy that is used by formal banks.

M-Shwari disbursed Sh. 42 billion compared to Sh. 44.8 billion worth of loans that were disbursed over the same period in 2021, representing a six percent drop.

Borrowers with a good repayment history will continue to access the loans at the normal charges while borrowers who have a higher default probability will access the loans at a higher charge.

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Currently, M-Shwari charges a flat rate of 9 per cent. This includes loan fees of 7.5 per cent and excise duty of 1.5 per cent for all customers.

“Now that we have collected enough data about our customers, we can actually ‘risk-base price’ them a bit better than we have done. So it’s to try to offer differentiated pricing,” NCBA Group chief executive officer John Gachora said.

“Today M-Shwari pricing is the same for everybody. The regime we want to go into is different prices for different people depending on credit performance.”

According to Gachora, the higher charges will be slapped on borrowers who also take longer than 30 days to clear their M-Shwari loans.

The new shift in loan pricing comes as NCBA prepares to spin M-Shwari into a standalone company in the race to create more personalized and feature-rich digital banking services for its customers.

According to Gachora, the NCBA Bank is in the process of forming a separate fintech company to host its digital loan platforms in Kenya and others in five countries where the bank operates.