NCBA
NCBA Chief Executive John Gachora.

Mobile loan service M-Shwari will henceforth use algorithms to compile customers’ credit profiles in order to impose credit risk premiums commensurate with a borrower’s risk of default.

In an interview with Business Daily, the Group’s CEO John Gachora says the lender has garnered sufficient customer data on transactions such as M-Pesa transactions, airtime purchases and previous M-Shwari borrowing which will predicate the advanced lending model.

“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.

“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,” said Mr Gachora.

Over the years, M-Shwari has coped with the challenge of defaulting customers which has informed a mechanism to predict a customer’s likelihood to renege on loan installments and assign a corresponding financial penalty.

Read also: Hustler loans: Safaricom, KCB, and NCBA cut Fuliza rates by 50 percent

Data mining techniques of classification and prediction models analyze bank customers based on their real data and rank their dependability as performing assets or liabilities for the bank.

This latest move by M-Shwari and its parent organisation conforms with President William Ruto’s push for credit scoring in the mobile lending industry contrary to indiscriminate credit referencing bureau (CRB) blacklisting which severely restricts credit access to large swaths of the borrowing public.

“Instead of saying you are in or out, we should have a credit scoring mechanism so we can have a graduated list from the least to the best so that everybody can have a chance even if you are somewhere at the bottom. You can always walk your way up as you learn the ropes.

“What we are asking is we don’t want credit listing to be an all-or-nothing, in-and-out engagement. We want credit listing to be a facility that gives everybody a chance to be their best in their own time,” President Ruto said recently when he met Safaricom, KCB and NCBA chief executives recently.

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