Safaricom has partnered with fintech company Pezesha to introduce a new loan service through the ‘Pochi La Biashara’ payment platform in a move set to boost access to credit for Kenya’s vast informal business sector .
The service, aimed at over 600,000 ‘Pochi La Biashara’ users, allows informal business owners to borrow small loans with a one-time access fee of just 2.76% on the principal amount. This partnership addresses a longstanding challenge faced by many micro-enterprises – lack of collateral to secure loans from traditional banks and microfinance institutions.
By leveraging Safaricom’s M-Pesa business accounts, entrepreneurs can now borrow money directly, enabling them to separate business and personal funds effectively. This feature promises to enhance financial management for small businesses.
Pezesha’s expertise in credit management will play a crucial role in determining borrowers’ creditworthiness. The fintech company will work closely with credit bureaus to ensure defaulters are listed and denied future loans, promoting responsible borrowing.
“Loans advanced shall be subject to a tenor of seven days and a maximum rollover period of fourteen days, during which a rollover fee equivalent to 3.85% for the fourteen days shall be charged. You may only rollover the loan once,” Safaricom stated in its terms and conditions.
Customers can choose to pay in instalments or settle the loan in full before the specified repayment date. In the event of a missed payment, deductions will be automatically made from the M-Pesa business wallet.
For small business owners, access to small, short-term loans can be a game-changer, enabling them to stock up their enterprises quickly and efficiently. With many micro-enterprises lacking the capacity to repay large loans, this service addresses a critical need in the market.
The partnership comes as Pezesha recently received a $500,000 investment from the Development Finance Corporation to enhance its credit-scoring technology. The company has already supported over 50,000 micro, small, and medium enterprises (MSMEs) in its credit management efforts.
As mobile phone penetration continues to rise and technology advances, digital lending platforms have become increasingly popular in Kenya. However, concerns over loan defaults and the perceived stress of short-term loans have prompted calls for responsible borrowing and better financial education.
By leveraging Safaricom’s vast M-Pesa network and Pezesha’s credit expertise, this new service aims to strike a balance – providing much-needed credit access to informal businesses while promoting sustainable lending practices.
Also read; https://financialday.co.ke/2388/safaricom-m-pesa-and-sumitomo-partner-to-boost-startups/