July 27, 2023
Safaricom has recently launched an innovative zero-interest credit service, named Faraja, designed to facilitate the purchase of goods up to Sh100,000. The initial block by the financial regulator caused much anticipation, but the service is now set to shake up the mobile loans market dominated by products like Fuliza, a mobile overdraft service available on M-Pesa.
With Faraja, Safaricom aims to transform the way mobile loans are perceived and utilized. More than 32 million Safaricom customers will now have the opportunity to make credit-based purchases from businesses on the Lipa Na M-Pesa platform. This move is expected to have far-reaching implications for both consumers and businesses in the market.
The credit service allows customers to make purchases ranging from Sh20 to Sh100,000 without incurring any interest fees. The payment for these purchases can be completed within a 30-day period, providing greater flexibility and convenience to customers.
One of the significant implications of Faraja is its potential to boost sales for businesses. Often, customers may wish to make purchases but lack the funds at that moment, resulting in lost sales opportunities. With Faraja, businesses can partner with EDOMx to offer credit to customers, empowering them to buy now and pay later. This strategic collaboration is expected to fuel sales growth and drive more transactions for merchants.
The service is currently available at various established outlets, including Naivas Supermarket, Goodlife pharmacies, and City Walk, among others. This wide range of merchant partners ensures that customers have a diverse selection of businesses to choose from when making credit-based purchases.
For businesses enrolled in Faraja, the benefits are manifold. They will receive full payment for their products or services as soon as a customer makes a payment through the credit service. This immediate access to funds will enable businesses to streamline their cash flow and operate more efficiently.
Safaricom, being listed at the Nairobi Securities Exchange (NSE), will play a crucial role in expanding Faraja’s reach. Through a collaboration with EDOMx, Safaricom will facilitate the Faraja service for more than 606,000 businesses on Lipa Na M-PESA. Businesses will be required to pay a negotiated facility fee for accessing the credit service, but the potential benefits in terms of increased sales and smoother cash flow make it an attractive investment for enterprises.
EDOMx’s role as a digital credit provider, backed by approval from the Central Bank of Kenya, further solidifies the credibility and reliability of the Faraja service. This approval aligns with the central bank’s regulations aimed at regulating fintech and safeguarding consumers from predatory lending practices and violations of privacy.
In conclusion, Safaricom’s Faraja service represents a transformative leap in the world of mobile loans and investments. By offering a zero-interest credit service, it empowers millions of customers to make purchases without financial constraints, while businesses stand to benefit from increased sales and immediate access to funds. As Faraja gains momentum in the market, it is expected to have a profound impact on the financial landscape, supporting businesses and consumers alike.
photo source: google
Delino Gayweh
Serrari Financial Analyst
