Safaricom launches interest-free loans for Kenyans

In a move that is expected to upend the mobile loans industry, Safaricom has introduced a zero-interest credit facility that would enable millions of its customers to shop for items up to Sh100,000 and pay later.

Users of the interest-free Faraja product can spend as little as Sh20 and as much as Sh100,000 on goods and services while paying the same amount without the extra fees associated with conventional credit products.

At the point of sale for the product that Equity Bank will finance, just the standard M-pesa transaction fees will be applicable.

Faraja is somewhat comparable to the Lipa Later service now available on the market, with the difference being that customers would this time leave with the items from a list.

A user will have a credit limit of up to Sh100,000, depending on their credit score, to make purchases against and then return at a later time within the 30-day term. It will function similarly to a digital credit card.

According to a statement on Safaricom’s website, “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. ”

Faraja, which is expected to compete with more expensive credit products like its own Fuliza, KCB-Mpesa, Mshwari, as well as digital credit providers like Tala, Branch, and Zenka, has the potential to revolutionize the mobile lending market.

The increase in Lipa na Mpesa transactions at particular stores presents an opportunity for Safaricom and Equity to generate revenue. Numerous businesses, such as Citi Walk, a store that sells shoes, the Goodlife pharmacy, and Naivas Supermarket, have already signed up to be merchants.

Safaricom introduced Lipa na M-Pesa in June 2013, and since then, it has actively sought out merchants of all sizes around the nation, including gas stations, supermarkets, corner stores, and cafes.