The country’s largest telco in terms of market share Safaricom is contemplating on whether to reduce the interest rates on its M-Pesa overdraft facility, Fuliza and M-Shwari, the firm’s interim Chief Executive Michael Joseph has revealed.
Safaricom’s bid to reduce Fuliza and M-Shwari charges concurs with the multiplying of unregulated micro lenders in the country in response to the growth for demand of cheap loans.
Without disclosing the timeframe and charges that may be reduced, Mr. Joseph underscored that the move was in line with the telco’s strategy to introduce affordable new services such as insurance and wealth management on its M-Pesa platform.
“I would like the cost of this service to come down and Safaricom is working to that end. It’s a regulated activity; certainly we will push to find ways to make it cheaper. What we want to do is provide more services on M-Pesa that will make life easier for our customers. You know these things like buying insurance, investing in wealth management, making it easy for businesses to access M-Pesa so they can have their own back office on M-Pesa,” the acting Safaricom said in a statement.
As it stands, Safaricom’s overdraft facilities Fuliza and M-Shwari have a monthly interest of 31 percent and 7.5 respectively. When annualized the rates become 372 percent and 395 percent respectively which is way above the Central Bank’s maximum interest lending rate of 13 percent.
Despite being introduced to make loans more accessible for consumers, the cap has made traditional banks shy away from offering loans to small businesses who they viewed as being risky borrowers capable of defaulting on loans. As a result of the credit crunch individual borrowers and Small and Medium Enterprises (SMEs) turned to unregulated digital lenders, who charge exorbitant interest rates, to acquire loans.
The mushrooming of unregulated digital lenders has become such a pressing issue that technology giant Google has introduced a raft of new measures to limit the emergence of unregulated digital lenders who take advantage of borrowers by offering high interest rates on loans.