By Getrude Matayo
Safaricom and NCBA have introduced a new update to their credit service. They have raised the minimum loan size on mobile lending platform M-shwari four times to 2,000 shillings in a move expected to reduce defaults largely by borrowers taking smaller amounts.
In late 2018, Safaricom revealed that it was bringing an overdraft facility for its millions of M-Pesa users. Dubbed Fuliza, the product went live in early 2019 and has since grown to be a go-to loan service for a lot of people.
Initially, borrowers have been accessing a minimum of 500 shillings through M-Pesa on the M-Shwari platform.
The changes apparently began to take effect on Monday and NCBA has communicated the new minimum limit to customers who qualify for it.
Those who do not qualify to borrow at least 2,000 shillings on the monthly loan product have been relegated to use the daily overdraft service Fuliza which is more expensive but structured to lower defaulters.
Borrowers pay a facility fee of 7.5 percent when taking the M-shwari loans, amounting to an annualized interest rate of 90 percent.
For instance, a borrower that used to pay up 56.25 shillings as interest for 1,000 M-Shwari loan will now be forced to pay up to 243 shillings for a month-long Fuliza debt of the same amount. That is quite high considering the risks associated with online loan products
According Business Daily, NCBA Group Director John Gachora, yesterday says 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
Mr. Gachora noted that the bank analysis has shown that most customers seeking credit below 2,000 shillings were for unplanned expenditures, and therefore the raised M-Shwari limit is meant to migrate such customers to Fuliza
“M-Shwari serves the critical need for planned credit and the demand for lower ad hoc (impromptu) credit is now better served with Fuliza”, Said Mr. Gachora.