No more Mshwari for those who want to borrow less than shs 2000

Safaricom and NCBA have just announced that Mshwari borrowers who used to borrow less than shs 2000 shall be taken to Fuliza effective immediately. Initially, Mshwari borrowers were allowed to access loans from shs 500 to shs 2000, but starting today the minimum amount that can be borrowed through Mshwari has been set to shs 2000.

The reason for the reset is the high default rate for those who borrow below shs 2000. Secondly, Fuliza allows NCBA and Safaricom to auto recover borrowed amounts from MPESA transfers, whereas Mshwari loans can only be paid back from the willingness of the loanee.

The third factor that has forced NCBA and Safaricom to push loans below shs 2000 to Fuliza is the crazy interest rates that come with Fuliza. Picture this – If you were to borrow shs 2000 every month for 12 month as you repay, by the end of the year you shall have given Safaricom and NCBA a total of shs 1,800 in what they call “loan processing fees”. However, under Fuliza, the same amount shall have given NCBA and Safaricom Shs 7904; and that’s because a typical Mswari loan attracts an annual interest of 90%, whereas a typical Fuliza loan attracts an interest of 395.2%.

The four times more interests on Fuliza therefore allows NCBA and Safaricom to tolerate defaulters, given that those who pay back the loans pay back unimaginably crazy interest rates. Yes, it is possible to default on Fuliza, and the way to do that is to borrow let’s say shs 1,500, then throw your SIM card away.

Given the effective changes, the same criteria that was used to award Safaricom customers Fuliza loans shall continue to be enforced. “Customer qualification for M-Shwari, Stawi and Fuliza will depend on the individual performance on mobile money, saving and on the observed repayment behaviour on all digital loans that they use”, said NCBA Group managing director John Gachora.