Safaricom has announced that it will deploy debt collectors for its newly launched interest-free loan service Faraja loan service which allows shoppers to shop for goods worth up to Ksh100,000 and pay later.
This is the first time the telco is using the services of debt collectors to recover loans. Initially, the telco used the threat of blacklisting defaulters with credit reference bureaus (CRBs) to recover unpaid loans and curb defaults.
“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, subject to applicable laws,” the telco says in a statement.
The findings of a recent household survey by the Central Bank of Kenya (CBK), FSD Kenya and the Kenya National Bureau of Statistics (KNBS) show that 50.9 percent of the respondents have defaulted on mobile loans.
Mobile banking and digital loans are issued without collateral, making them vulnerable to default by borrowers.
Faraja seeks to compete with the already existing mobile loan services including Fuliza, KCB-Mpesa, M-Shwari as well as digital credit providers such as Tala, Branch and Zenka.
“You will only be required to repay the outstanding facility amount as advanced to you by us (in whole or in part) using the designated Paybill number or such other channels as provided by us from time to time,” Safaricom says in a statement on its Website.
The Faraja product is owned by Edomx Ltd, a Kenya-based financial technology firm, fronted by Safaricom and bankrolled by Equity Bank.
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