Days after President William Ruto pushed for lower interest rates on mobile loans, leading to Safaricom cutting Fuliza charges, the giant telco is looking to implement a risk-based lending Model for its M-Shwari service. Safaricom partnered with NCBA in 2012 to launch M-Shwari, a savings and loan service that enables M-PESA customers to; save as little as Kshs. 1, and access credit from Kshs. 1,000.
M-shwari has been operating on a fixed rate of 9% interest charge for all borrowers. However, the new lending model seeks to create a risk profile for individual borrowers and charge interest according to one’s risk profile. “M-Shwari pricing will continue to be in line with the behaviour, costs and risks associated with mobile loans. These are not necessarily comparable with regular bank loans which are processed slowly, with a lot of information and analysis,” said Mr.Gachora, NCBA Bank Managing Director.
NCBA and Safaricom’s new risk-based lending will depend on a system that will collect data on previous M-Shwari loans, airtime purchases and M-Pesa transactions to create a customer’s risk profile. “Now that we have collected enough data about our customers, we can actually ‘risk-base price’ them a bit better than we have done. So as to try offer differentiated pricing,” Mr Gachora told the Business Daily.
This is a move that we are sure will be applauded by the President. Even before the elections, President William Ruto had championed for assigning credit scores to borrowers so as to end the blacklisting of borrowers by Credit Reference Bureaus (CRBs). During his inauguration speech on September 13, President Ruto indicated that his government would initiate reforms to the operations of CRBs in a bid to better credit access to the more than 14 million persons listed with the credit bureaus. A day after his inauguration, he was quoted saying, “Instead of saying you are in or out, we should have a credit scoring mechanism so we can have a graduated list from the least to the best so that everybody can have a chance even if you are somewhere at the bottom. You can always walk your way up as you learn the ropes.”
This new lending model that seeks to mimic the traditional bank lending culture will penalise loanees who take more than the set 30 days to clear their M-Shwari loans by charging them higher interest rates.
The truth of the matter is that Covid-19 led to a record increase in opening of loan accounts among Kenyans. In February this year, statistics showed that there had been an increase of 10% in the number of Kenyans taking loans from financial institutions. This tells us that there is a need for affordable credit to the Kenyan population. It is in this regard that FaidiHR has now launched Faidi Loans. Faidi Loan is an instant unsecured mobile loan facility for customers using FaidiHR to process their payroll. The loan is instantly credited to your M-Pesa and is deducted from the payslip at the end of every payroll month.
FaidiHR has a free plan that you can hop on to enjoy these and more benefits. Create an account and start managing your first five employees for absolutely free. Follow the link: https://bit.ly/3qFOzAd, to get started.
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