Top mobile lenders, Safaricom in conjunction with NCBA have raised the minimum loan size on the mobile lending platform, Mshwari in fourfold to spot a minimum amount of Sh. 2,000.
According to credible sources, the move is in the spirit of pruning perennial defaults, largely by borrowers taking smaller loans. Since its inception, borrowers have been accessing a minimum of Sh. 500, through M-Pesa, on the M-Shwari platform.
The changes took effect on Monday, August 10, 2020, with NCBA taking to communicate the new credit limit to customers who qualify for it.
Those who do not qualify to borrow at least Sh. 2,000 on the monthly loan product have been relegated to use the daily overdraft service Fuliza which is more expensive but structured to lower defaults.
The interest cap for the short term Fuliza service is 1.083% equating to 395.2% annually. This implies that a user who would part with Sh. 56.25 for a Sh. 1,000 M-Shwari loan will now be set back Sh. 243.68 for a Fuliza debt that lasts a month.
Borrowers pay a facility fee of 7.5% when taking M-Shwari loans, amounting to an annualized interest rate of 90%.
NCBA Group managing director John Gachora, the bank’s analysis has shown that most customers seeking credit below Sh. 2,000 were for unplanned expenditures, and therefore the raised M-Shwari limit is meant to migrate such customers to Fuliza.
Official statistics show that more than 3.2 million Kenyans had been negatively listed as loan defaulters by April this year. This was credited to the loss of jobs that left thousands in a debt trap.