Safaricom to Use Debt Collectors to Recover Unpaid Faraja Loans

Safaricom will step up its debt recovery measures with the launch of its newest loan facility. The telco will employ the use of debt collectors to recover unpaid loans in the Faraja loans. The service will give subscribers access to Lipa na M-Pesa loans from Sh20 to Sh100,000 to shop which can be used for shopping.

This will be the first time Safaricom will be deploying debt collectors to pursue defaulted loans, meaning property might be seized and auctioned. Normally, Safaricom blacklists its Fuliza and M-Shwari defaulters with the Credit Reference Bureaus (CRBs), locking them out of loans from other lenders.

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“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.

Mobile banking loans are  frequently used as an emergency measure by people or businesses who are short on funds. The loans are given without collateral, making them subject to default by borrowers.

A recent household survey conducted by the Central Bank of Kenya (CBK), FSD Kenya, and Kenya National Bureau of Statistics (KNBS) shows that 50.9 percent of respondents have defaulted on mobile loans.

Read also: Telkom Faces Delays in Obtaining Approval for the Formation of Mobile Money, Digital Subsidiaries

Safaricom will not charge interest on Faraja 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 says in a statement on its Website.

Users must have an active line and their credit limit will be determined by the individual’s credit rating. Faraja will only be accessible through Paybill and Till Number options, unlike the overdraft facility Fuliza, which allows clients to send money.

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