The Central Bank of Kenya has stalled Safaricom’s plan to roll out an interest-free Lipa na M-pesa loan dubbed Faraja. The Faraja loan product is owned by Kenya-based financial technology firm, EDOMx Ltd, with Safaricom and Equity Bank listed as its partners.
According to the Business Daily, CBK asked the parties to stop release of Faraja loans just hours before its unveiling. The Lipa na M-pesa loan is meant to help subscribers access credit to purchase products.
Parties privy to the matter said that CBK called the parties hours before the launch on July 6th, saying the loan product was still under regulatory review and its approval was still pending. The official launch was to be held on July 6 at 8pm. The media and other stakeholders had been invited to launch.
Once CBK pulled the plug, the launch was called off immediately, and both EDOMx and Safaricom pulled down the Faraja loans’ terms and conditions from their websites.
According to the sources, CBK had already offered provisional approval for the loan product, encouraging the parties to go ahead with the launch.
“Faraja was to be offered by EDOMx in partnership with Safaricom and Equity Bank. As communicated by EDOMx, Farajas’s launch was postponed and a new date will be communicated in due course,” Safaricom said in response to inquiries on the postponement of the launch.
CBK requires firms to provide features, terms and agreements for customers, fees, and measures against risk for any product before launch. The product’s marketability, tax ramifications, and proof that it won’t violate legal or prudential standards on the market should also be proven.
The CBK also mandates that businesses provide the proper channels for complaints and dispute resolution, maintain the privacy of client information, and abstain from forceful selling and undue pressure on consumers.
Faraja loans will allow subscribers to purchase items from Sh20 to a maximum of Sh100,000 and pay later. The service will be supported by Equity Bank, and will be available at selected merchants such as Naivas, Good Life Pharmacy and Citi Walk.
The telco will not charge interest on the loans, however, the usual M-Pesa transaction charges will be applicable. Users will also be required to pay back the credited amount within 30 days.
“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 said in a statement on its Website.
Faraja will only be accessible through Paybill and Till Number options, unlike the overdraft facility Fuliza, which allows clients to send money. Safaricom is planning to roll out the service to more merchants to include fuel stations, restaurants and more supermarkets.