Safaricom's Micro-Lending Service Starting to Blacklist Loan Defaulters

Money Transfer

Kenya's Commercial Bank of Africa (CBA) has passed details of over 140,000 users of Safaricom's micro-lending service to blacklisting services after they defaulted on loan repayments.

Safaricom launched the micro-lending service in association with the CBA in November 2012, and now processes an average of 24,000 loans every day, collectively worth around Sh 7.3 million (US$83,000).

"CBA confirmed (it) intends to report the M-Shwari portfolio to the credit reference bureaus," read a report authored by a consultant from Oxford University on behalf of Financial Sector Deepening Kenya, an organisation involved in expanding access to financial services.

The CBA started passing loan defaulters details to the credit agencies last October, and being blacklisted could bar a consumer from being able to borrow again for up to five years.

Some 25,000 of those reported to the credit agencies have since cleared their debts, but will still have the black-mark against their account for a number of years.

However, customers with good credit ratings can now borrow up to Sh8,000 from the M-Shwari service. Based on the individual customer's M-Pesa transactions and savings history, CBA determines the customer's eligibility. The loan money is sent by CBA to the customer's M-Pesa account instantly.

The CBA is now the country's second largest retail bank, thanks largely to the Safaricom venture.