Risky borrowers will pay more to access M-Shwari loans as Safaricom and NCBA Group plan a new lending model with different charges based on the credit profile of customers.
NCBA chief executive John Gachora said the bank will roll out a risk rating model for M-Shwari akin to that of commercial banks.
Banks use a base rate which is normally the cost of funds, plus a margin and a risk premium, to determine how much they charge a particular customer.
For M-Shwari, it will mark a departure from the current model where it charges a flat rate of 9.0 percent—loans fees of 7.5 percent and excise duty of 1.5 percent—for all customers.
NCBA will rely on an algorithm that builds a financial profile of customers based on their previous borrowing on the platform, M-Pesa transactions and airtime purchases.
“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,” Mr Gachora told the Business Daily in an interview.
