Safaricom will now use debt collectors to track down loan defaulters for its Faraja Service, a planned zero-interest credit service that will allow millions of its customers to shop for goods worth up to Ksh100,000 and pay later.
The decision to involve debt collection agencies may subject thousands of borrowers to property seizures. This also indicates that the company is stepping up efforts to improve repayment.
This will be the first time Safaricom will seek the assistance of debt collection agencies for its credit products, which include M-Shwari and Fuliza, in a market where mobile loans currently have a high default rate.
Safaricom previously relied on the threat of blacklisting defaulters with Credit Reference Bureaus (CRBs) to reduce defaults and recover unpaid loans.
Borrowers who are reported to one of Kenya’s three CRBs jeopardize their future credit opportunities.
In a statement, the telco stated that, subject to applicable laws, they would 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.
According to the results of a recent household survey conducted by the Central Bank of Kenya (CBK), FSD Kenya, and the Kenya National Bureau of Statistics (KNBS), 50.9 percent of respondents defaulted on mobile loans.
In a time when digital lenders have flooded the Kenyan market with high-interest rates that can reach 520 percent per year, the number of defaults has increased.
Missing a scheduled repayment, paying late, or not paying at all were all defined as loan defaulting in the survey.
Defaulters will not only bear the costs of hiring debt collectors, but Safaricom will suspend or close a defaulter’s Faraja account.
Get Published Today
Email: uzalendonews24@gmail.com to submit your story.
SUBSCRIBE TO OUR YOUTUBE CHANNEL
