With the opening of its most recent lending facility, Safaricom will intensify its debt recovery efforts. To recover unpaid loans under the Faraja loans, the telco will hire debt collectors.
Subscribers would have access to Lipa na M-Pesa loans from Sh20 to Sh100,000 to spend for shopping through the program.
For the first time, Safaricom will use debt collectors to pursue unpaid loans, which means that property may be seized and sold at auction. Typically, Safaricom puts its Fuliza and M-Shwari defaulters on a blacklist with the Credit Reference Bureaus (CRBs), preventing them from obtaining loans from other lenders.
“At any time after an event of default has occurred which is continuing, we may, without prejudice to any other right or remedy granted to us under any law… take reasonable measures including engaging an independent debt-collection agency, to recover the amount in default (and/or) submit information concerning the event of default to Credit Reference Bureaus, subject to applicable laws,” the telco says in a statement.
When a person or business is short on cash, they usually turn to mobile banking loans as an emergency option. Due to the lack of collateral, the loans are vulnerable to default by borrowers.
50.9 percent of respondents to a recent household survey by the Central Bank of Kenya (CBK), FSD Kenya, and Kenya National Bureau of Statistics (KNBS) have defaulted on mobile loans.
Safaricom will not charge interest on Faraja loans, however, the usual M-Pesa transaction charges will be applicable. Users will also be required to pay back the credited amount within 30 days.
“You will only be required to repay the outstanding facility amount as advanced to you by us (in whole or in part) using the designated Paybill number or such other channels as provided by us from time to time,” Safaricom says in a statement on its Website.
Users must have an active line, and their credit limit is based on their credit rating. Faraja won’t allow customers to send money; instead, it will only be accessible through Paybill and Till Number options, unlike Fuliza, an overdraft facility.
