Safaricom introduces Faraja, a zero-interest financing option for purchases of goods up to KES 100,000

Safaricom has teamed with Equity Bank and EDOMx to create Faraja Credit, a 0% interest Buy Now Pay Later (BNPL) product that gives you credit to make in-store purchases at chosen merchant outlets across the country.

Faraja will function similarly to the Lipa Later service that is now offered in the market, except that purchasers will walk away with goods from a list of pre-selected merchants without having to pay in advance. It will function similarly to a digital credit card in that a user will have a credit limit of up to Sh100,000 to make purchases against and then repay within the 30 day term, based on their credit score.

According to the Business Daily, the product will be bankrolled by Equity Bank.

Faraja aims to be a game changer in the mobile lending sector, undercutting more expensive credit offerings. Safaricom and Equity are hoping to profit from the increase in Lipa na Mpesa transactions at specific stores.

Safaricom’s website states that the smallest transaction amount is Kshs 20 and the maximum is Kshs 100,000, although this is limited to your approved credit limit.

Safaricom also states that there will be no late payment penalties, but you will lose access to your Faraja account if you pay late. You also have the option to make partial payments before the due date.

Business Daily also reports Safaricom will use debt collectors to seek outstanding debts in its proposed credit service, potentially exposing thousands of customers to property seizures.

The move, prompted by the growing popularity of BNPL, is spawning a new fintech segment. With the growing popularity of this new market, it is projected to expand further as people are increasingly looking for strategies to manage their costs and budgets.

Despite, critics are concerned that many people are spending more than they can afford, and that some may be unaware they are going into debt.

How does one use Faraja?

At the point of purchase, dial *799#, select Faraja, and pay the amount to the till number at the merchant store as you would with MPESA. On the app, select Faraja, and pay amount at the merchant store.

There will no fee charged while using Faraja, however, M-PESA transaction charges will apply.

Updated on July 13, 2022 to include the involvement of debt collectors in loan recovery.