Safaricom plans to drop M-Shwari, Fuliza charges

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Safaricom plans to drop M-Shwari, Fuliza charges


Mr. Michel Joseph. PHOTO | SALATON NJAU | NMG

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summary

  • Safaricom #ticker: SCOM plans to reduce fees charged to customers on its M-Pesa, Fuliza overdraft facility and M-Shwari loans amid pressure for state to cut unregulated digital mobile lenders who charge rates exorbitant monthly interest.
  • The telecom operator believes it wants to reduce the costs of accessing loan products as part of a larger plan that will see more features added to the M-Pesa platform, including insurance and credit management. heritage.
  • Pressure from Safaricom to reduce Fuliza and M-Shwari fees coincides with the proliferation of unregulated micro-lenders in response to growing demand for quick loans, which have left borrowers with high interest rates.

Safaricom #ticker: SCOM plans to reduce fees charged to customers on its M-Pesa, Fuliza overdraft facility and M-Shwari loans amid pressure for state to cut unregulated digital mobile lenders who charge rates exorbitant monthly interest.

The telecom operator believes it wants to reduce the costs of accessing loan products as part of a larger plan that will see more features added to the M-Pesa platform, including insurance and credit management. heritage.

Pressure from Safaricom to reduce Fuliza and M-Shwari fees coincides with the proliferation of unregulated micro-lenders in response to growing demand for quick loans, which have left borrowers with high interest rates.

“I would like the cost of this loan to go down and Safaricom is working towards that end. It is a regulated business, we will certainly be pushing to find ways to make it cheaper, ”said Michael Joseph, Interim CEO of Safaricom, without giving details on the timing and levels of fee reductions.

“What we want to do is provide more services on M-Pesa that will make life easier for our customers. You know these things like buying insurance, investing in wealth management, making it easier for businesses to operate with M-Pesa so that they can have their own back office on M-Pesa, ”Mr. Joseph told Business Daily in an interview after the company. posted a jump in its first half profit on Friday.

The Fuliza overdraft facility, which launched on January 7, offers M-Pesa users additional loans whenever they need to make a transaction, but find they are running out of money in their mobile wallets.

For example, those who borrow 1,000 shillings from Fuliza pay a one-time fee of one percent or 10 shillings and a daily charge of 10 shillings. This translates into a monthly charge of 31% or an annualized charge of 372%, well above the regulated maximum annual bank interest of 13%.

Market leader M-Shwari, Kenya’s first savings and loan product introduced in 2012 by Safaricom and Commercial Bank of Africa, which is now NCBA Bank after merging with NIC, charges a “facilitation fee” of 7 , 5% on the loan regardless of its duration. This brings its annualized lending rate to 395%.

Other digital lenders charge interest rates of up to 520% ​​when annualized, resulting in an increase in defaults and an ever-increasing number of defaults that have been negatively listed with credit bureaus. credit reference (CRB).

“As M-Pesa, we shouldn’t just focus on lending. I’m not happy with the digital loans that are out there, not so much with the banks that are regulated to a certain extent, but there are a lot of people out there who loan money on a basis, which I’m not happy with, “said Joseph. Fuliza is underwritten by KCB Group and NCBA.

The current legal regime for digital lenders, which is outside the direct jurisdiction of the Central Bank of Kenya (CBK), allows vendors, banks and others to bypass legal caps on interest rates.

Since 2016, the government has set the rate banks can charge customers four percentage points above the CBK’s benchmark – currently nine percent – in an effort to make loans affordable. The law provides that bank lending rates are capped at 13%.

The cap reduced credit growth to the private sector as commercial banks turned their backs on millions of low-income customers as well as small and medium-sized businesses deemed too risky to lend.

In turn, the credit crunch has triggered an appetite for digital lending, paving the way for digital lenders to invade Kenya’s credit market.

The invasion was among the reasons President Uhuru Kenyatta cited when he called on lawmakers to remove the cap on commercial lending rates in his memo to parliament.

Lawmakers have the option of removing the cap from the bill or overriding the president if two-thirds of the 349 members vote to override his position. They will debate Mr Kenyatta’s note from tomorrow.


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