Safaricom has launched a zero-interest credit service that will allow millions of its customers to shop for goods worth up to Sh100,000 and pay later, potentially disrupting the mobile loan market.
Users of the Faraja interest-free credit product will be able to purchase goods and services from as little as Sh20 up to a maximum of Sh100,000 and pay the same amount without any additional fees seen with other credit products.
However, only standard M-pesa transaction fees will apply at the point of sale for the Equity Bank-backed product.
Faraja is similar to the Lipa Later service that is currently available in the market, except that this time, shoppers will walk away with goods from a list of selected merchants without having to pay upfront in installments.
It will function similarly to a digital credit card, with a credit limit of up to Sh100,000, depending on the user’s credit score, to make purchases against and then repay at a later date within the 30-day window.
“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.
Faraja promises to be a game-changer in the mobile loans market, undercutting more expensive credit products such as Fuliza, KCB-Mpesa, Mshwari, and digital credit providers such as Tala, Branch, and Zenka.
Safaricom and Equity are hoping to profit from the increase in Lipa na Mpesa transactions at specific stores. Hundreds of merchants have already signed up, including Naivas Supermarket, Goodlife Pharmacy, and Citi Walk, a shoe-selling store.
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