Safaricom and NCBA Group are planning to introduce a new lending model for M-Shwari 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 similar to that used by commercial banks, Business Daily reports.

This will mark the end of the current model where M-Shwari charges a flat rate of 9.0 percent—loan fees of 7.5 percent and excise duty of 1.5 percent—for all customers.

NCBA will reportedly rely on an algorithm that creates a credit 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,” Gachora told the Business Daily.

“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.”

NCBA Bank managing director John Gachora

The new pricing model is expected to punish defaulters and borrowers who take more than the set 30 days to clear their M-Shwari loans.

Gachora said the risk-based lending policy under M-Shwari will address the borrower’s behaviour and not match the banking rates.

“M-Shwari pricing will continue to be in line with the behaviour, costs and risks associated with mobile loans. These are not necessarily comparable with regular bank loans which are processed slowly, with a lot of information and analysis,” he said.

“Now that the product (M-Shwari) has come of age, access has been established. Our thinking now is we can talk about pricing, hence the changes we have made on Fuliza pricing and also the changes that we want to make on M-Shwari prices.”

Gachora said the bank is also in the process of forming a separate fintech company to host its digital loan platforms(including M-Shwari) in Kenya and others in five countries where the bank operates.

Additional Reporting by the Business Daily