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.
How does one Payback/ Repay for Faraja?
To repay your Faraja loan, you dial *799#, your transactions will be displayed, you can pay for only one transaction at a time. Choose the one you want to pay for, press send.
You will be required to enter your MPESA PIN as the money is being paid from the MPESA wallet, press send, a screen will appear for you to accept or decline. Once accepted, a notification will be sent confirming the transaction details, amount paid and new credit balance.
The same can be done on the app. For a 30-day loan cycle, the loan is due on the 30th day and likewise, the 7-day loan is due on the 7th day after the loan is given.
Note: Despite the availabilty of details on the Safaricom and Faraja Credit websites, the launch is not yet official. The launch was scheduled for today, 6th July, but was cancelled ‘due to unavoidable circumstances’. However, the USSD works.
Updated on July 13, 2022 to include the involvement of debt collectors in loan recovery.