Why Mobile Micro-Loans Are Becoming More Popular With Entrepreneurs

Written by Wellington Ayugi

For Kenyans who are self employed, working in the informal sectors or running small to medium sized enterprises, access to credit facilities has been a challenge. Due to the dynamics of their work, most of the time they do not possess the steady income or credit history that traditional banks require of a person, to qualify for these loans.

This is despite the fact that as entrepreneurs, they still require financing in order to grow and sustain their business ventures. With the new interest rate cap bill, more banks are becoming a lot more rigid when it comes to extending credit to entrepreneurs. 

However, with the technological advancements in mobile technology and micro-finance platforms, mobile micro-loans have started to become more and more popular among many entrepreneurs in Kenya.

These advancements have provided a means for entrepreneurs to secure loans quickly without engaging a bank directly, doing routine paperwork or providing a security. To better grasp mobile micro-loans you have to understand the nature of a micro-loan.

What is a Micro-Loan?

A micro-loan is simply a short-term loan with a low interest rate. It is usually provided to individuals who own SMEs (small to medium sized enterprises) or startups. Mobile micro-loans are short-term loans that are extended through mobile devices by banks and other financial institutions.

Benefits of Mobile Micro-Loans

Mobile micro-loans are beneficial in the following ways:

  • They have flexible accessibility requirements: Traditional lenders usually have a number of stringent requirements for a person to access short-term funding. These include things such as having a good credit rating, access to audited financial statements, business history and so on. On the other hand, mobile micro-loan providers take into account other factors such as rate of airtime top-ups by user, phone model and data usage. This makes it a lot simpler for many people to qualify for the loans.
  • They allow you to build a good credit rating: The loans are a very useful way for borrowers who are typically locked out of conventional financing options, to build or improve their credit ratings. As a small enterprise owner makes payments on their loans, the lender forwards the records to the credit bureaus. A good credit history shall then enable the borrower to qualify for bigger loans from conventional sources.
  • They are usually processed in a short period of time: While a traditional loan may take time to be processed due to bureaucratic channels, mobile loans are almost instant. Once the loan is approved it is just a matter of minutes before you receive the amount via text.

Examples of Mobile Micro-Loan Platforms

In Kenya, here are some of the familiar mobile micro-loan products that can give your business a boost whenever the need arises.


This service was established in 2015 as a result of a partnership between Safaricom and Kenya Commercial Bank. Customers are able to borrow micro loans between KES.100 to KES.500,000 through their mobile devices. To access the service, customers dial *844# and follow the prompts. The repayment program is quite flexible, in that if you pay in the parameters below the percentages apply. 

  • 1 month at 6% interest
  • 3 months at 5% interest
  • 6 months at 4% interest

2. M-Shwari

Conceptualized in 2012, this is a collaboration between Safaricom and CBA (Central Bank of Africa). It has proved to be very popular because it has over 10 million accounts and loan disbursements averaging at 50,000 loans on a single day. The features of using M-Shwari include:

  • Getting a minimum loan amount of Kshs. 100 and the maximum is Kshs 20,000
  • Having a loan repayment period is 30 days at an interest rate of 7.5%
  • The repayment process is done via M-Pesa or deducted on the M-Shwari account

Today, accessing instant loans is simpler because of the many platforms available in the country for mobile micro-loans. In many cases all you need is a phone and an M-Pesa account. Other platforms such as Branch, Tala, and Saida may require you to have a smartphone due to the download of online applications. 

What are your thoughts on mobile micro-loans? Please comment below if you have ever taken one and whether it was beneficial to you.

Learn More:

7 sure ways to qualify for/increase your mobile loan limit


About the author

Wellington Ayugi

Wellington Ayugi handles Business Development at Covered and has a passion for personal finance, microfinance, and developments in financial technology