Safaricom are set to shift M-Shwari loans of below 2000 Kenyan shillings to Fuliza in a bid to curb the defaulters menace, reports the Business Daily.
Owing to the large number of M-Shwari defaulters, safaricom is set to use this method to get back some of the money they lend Kenyans who are seemingly not ready to pay back.
M-Shwari was started as the loan lending Safaricom affiliate and has been giving Kenyans loans for a long time now. With Kenyans being the hard to pay type, Safaricom decided to start the Fuliza loan affiliate program.
Fuliza has so far proven more successful than M-Shwari since the money is recovered as soon as a top up to M-pesa is noticed.
Safaricom have therefore brainstormed and felt that shifting the small M-Shwari loans to Fuliza could help them settle the payback issues they have been facing with Kenyans.
Registered safaricom users with an M-Shwari debt of 2000 and below will be the most affected by this new resolution
Those who do not qualify to borrow at least Sh2,000 on the monthly loan product have been relegated to use the daily overdraft service Fuliza which is more expensive, but structured to lower defaults.
Borrowers pay a facility fee of 7.5 per cent when taking the M-Shwari loans, amounting to an annualised interest rate of 90 per cent.
On Fuliza, the fee is 1.083 per cent or 395.2 per cent annualised, underlining the high cost of using the short-term credit services regularly.
This means a borrower who used to part with Sh56.25 for a Sh1,000 M-Shwari loan will now be set back Sh243.68 for a Fuliza debt that lasts a month.
NCBA Group managing director John Gachora yesterday told the Business Daily that the changes will bring a clear product differentiation for borrowers seeking digital loans through Fuliza, M-Shwari or Stawi products in which the lender participates.
He said the bank’s analysis has shown that most customers seeking credit below Sh2,000 were for unplanned expenditures, and therefore the raised M-Shwari limit is meant to migrate such customers to Fuliza.
Access to borrowing and repayment trends on Fuliza, M-Shwari and Stawi platforms have put NCBA in a position to make lending decisions based on customer’s credit risk profile.
“We are at the centre of these three products and so we analyse data every day and track behaviours. This is what we are trying to address,” said Mr Gachora.
“Since launching M-Shwari, we have rolled out Fuliza with Safaricom. Fuliza is the one to address this ad hoc immediate credit. So we see the new proposition of M-Shwari being planned short-term credit.”
M-Shwari had by mid-December last year disbursed a cumulative Sh430 billion in loans to 31 million customers, seven years since its launch.
Fuliza on the other hand had lent an estimated Sh81 billion in the six months to June last year. The service was introduced in January 2019.
Safaricom says that M-Shwari and Fuliza contributed 5.8 per cent growth in M-Pesa revenue in the year to March.
M-Pesa grew 12.5 per cent to Sh84.4 billion.