Safaricom has revealed plans to use debt-collectors to recover unpaid debts following the launch of its latest credit offering ‘Faraja’.
Faraja is billed as a zero-interest credit service allowing users to purchase goods and services from Ksh20 up to Ksh100,000. The product is financed by Equity Bank and offered in partnership with EDOMx Ltd.
Although it is interest-free, customers will be required to pay the normal M-Pesa transaction charges, and the credited amount within 30 days. In a disclosure, Safaricom noted that collection measures available to it included enlisting of debt-collection agencies and listing on Credit Reference Bureaus (CRBs).
Unlike its existing loan offerings, Faraja will only be available on Till Number and Paybill – mobile payment options under Lipa na M-Pesa. Several major retailers and consumer brands have already been onboarded on Faraja , including supermarket chain Naivas – a major seller of important goods – Goodlife Pharmacy and shoe seller City Walk.
“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 (CRBs), subject to applicable laws,” the statement from the company disclosed.
Safaricom already has on its M-Pesa platform market-leading mobile lending products in overdraft facility Fuliza, and cash loans products M-Shwari and KCB M-Pesa.
As it is self-regularised with loan amounts automatically deducted from M-Pesa wallets, Fuliza has the highest loan repayments rate among Safaricom’s loan products, up to 99% as of September 2021.
Repayment rates are lower for M-Shwari. Loan defaulters already face listing on Credit Reference Bureaus (CRBs).
In the year to March, the Lipa na M-Pesa platform saw payments of Ksh1.4 trillion while a total of Ksh9.78 trillion was paid through M-Pesa.
Faraja is available to qualifying M-Pesa customers with an active Safaricom line. Credit limits are determined by credit viability.
Customers can opt into the service via USSD code.
By Business today