How Safaricom Messed Up With Mobile Loans – Michael Joseph Explains

Former Safaricom Chairman and CEO Michael Joseph has doubled down on his criticism of the mobile lending sector in Kenya. Safaricom boasts of market-leading mobile loan services in M-Shwari, Fuliza and KCB M-Pesa and has previously come under pressure over the operations and terms of the services.

Fuliza, for example, was launched in 2019 and charges Ksh2 per day for Ksh100 overdraft and Ksh30 per day for Ksh2,500 and above. This makes it one of the most expensive loan facilities in the country.

READ>>Atwoli Takes On Fuliza And Digital Loan Apps

Joseph, who was the company’s CEO when it rolled out the pioneering mobile money service M-Pesa, explained that his vision was focused on driving savings – but corporate interests meant that lending was simply more profitable.

“I really wanted M-Pesa to have much more impact on people’s lives in terms of savings. Unfortunately, because the financial rewards if you lend money are much higher it became [more of] a lending product than a saving product. This lending culture in Kenya is very bad for our country. It will take time to change this,” he told Business Daily in a new wide-ranging interview.

Joseph had initially stirred the pot in April when he publicly slammed the lending services built into M-Pesa.

“I wanted people to save for the future instead of borrowing for funerals or weddings or school fees. Unfortunately, because you (telcos and banks) make more money when you lend people more money, it became a lending product…In my personal view, some of the things we are doing with M-Pesa, like borrowing, are not good for the people,” he stated.

Safaricom’s latest lending product, Faraja, was stopped in its tracks by the Central Bank of Kenya (CBK) which reportedly halted its planned launch in July pending regulatory approvals. The service offers interest-free Lipa na M-Pesa loans allowing customers to pay for goods and services from a range of businesses.

It works like a digital credit card, with a user getting a credit limit of up to Ksh100,000, depending on his or her credit score, to make purchases against and then repay at a later date. Naivas Supermarkets, Goodlife Pharmacy and shoe-seller City Walk are among businesses that had already signed up to the service.

“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 that was later pulled down from its website.

READ MORE>>Inside Safaricom’s ‘Free’ Faraja Loans For Buying Goods