- Safaricom
- is considering lowering the customer charges on its M-Pesa overdraft facility, Fuliza, and M-Shwari loans amid pressure for the State to curb unregulated digital mobile lenders who charge exorbitant monthly interest rates.
- The telecoms operator reckons it wants to lower the costs of accessing the borrowing products as part of a larger plan that will see more features added on the M-Pesa platform including insurance and wealth management.
- Safaricom’s push to lower Fuliza and M-Shwari charges coincides with the proliferation of unregulated micro lenders in response to the growth in demand for quick loans, which have left borrowers with high interest rates.
Summary
Safaricom is considering lowering the customer charges on its
M-Pesa overdraft facility, Fuliza, and M-Shwari loans amid pressure for
the State to curb unregulated digital mobile lenders who charge
exorbitant monthly interest rates.
The telecoms
operator reckons it wants to lower the costs of accessing the borrowing
products as part of a larger plan that will see more features added on
the M-Pesa platform including insurance and wealth management.
Safaricom’s
push to lower Fuliza and M-Shwari charges coincides with the
proliferation of unregulated micro lenders in response to the growth in
demand for quick loans, which have left borrowers with high interest
rates.
“I would like the cost of this lending to come
down and Safaricom is working to that end. It’s a regulated activity,
certainly we will push to find ways to make it cheaper,” acting
Safaricom CEO Michael Joseph said without giving details about the
timing and levels of fees cut.
“What we want to do is
provide more services on M-Pesa that make will make life easier for our
customers. You know these things like buying insurance, investing in
wealth management, making it easy for businesses to operate using M-Pesa
so they can have their own back office on M-Pesa,” Mr Joseph told the
Business Daily in an interview after the firm posted a jump in its
first-half profit on Friday.
The Fuliza overdraft facility, which was launched on January 7,
provides M-Pesa users with top-up loans whenever they need to make a
transaction, but find they lack enough money in their mobile cash
wallets.
For instance, those borrowing Sh1, 000 on
Fuliza pay a one-off of one percent or Sh10 and a daily charge of Sh10.
This translates to a monthly charge of 31 percent or an annualised fee
of 372 percent—way above the maximum regulated annual bank interest of
13 percent.
Market leader M-Shwari, Kenya’s first
savings and loans 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 percent on credit regardless of its duration.
This pushes its annualised loan rate to 395 percent.
Other
digital lenders charge interest rates of up to 520 percent when
annualised, leading to mounting defaults and an ever ballooning number
of defaulters that have been adversely listed with credit reference
bureaus (CRBs).
"As M-Pesa we should not just focus on
lending. I’m not happy with the digital lending that is out there, not
so much from banks which are regulated to some extent but there are a
lot of people lending money on a digital basis, which am not happy
with," said Mr Joseph. Fuliza is underwritten by KCB Group and NCBA.
The
current legal regime of the digital lenders, which is outside the
direct remit of the Central Bank of Kenya (CBK), allows providers, both
banks and others, to sidestep the legal caps on interest rates.
Since
2016, the government set the rate that banks can charge customers at
four percentage points above the CBK’s benchmark — currently nine
percent — in an attempt to make loans affordable. The law provides that
banks’ lending rates be capped at 13 percent.
The cap
reduced private sector credit growth as commercial banks turned their
backs on millions of low-income customers as well as small and
medium-sized businesses deemed as too risky to lend to.
In
turn, the credit crunch triggered an appetite for digital loans, paving
the way for digital lenders to invade Kenya’s credit market
The
invasion is among the reasons that President Uhuru Kenyatta cited when
he asked lawmakers remove the cap on commercial lending rates in his
memo to Parliament.
Lawmakers have the option of
removing the cap from the bill or overruling the President if two thirds
of the 349 members vote to override his position. They will debate on
Mr Kenyatta’s memo from tomorrow.
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