Airtel Kenya takes on shylocks with new loans product

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Adapted From Business Daily:

Airtel Kenya has signed a partnership with a Mauritius-based consumer credit firm AFB that will allow its subscribers access loans and make repayment through their phones.

The deal is the latest in a series of mobile-based micro credit services seeking to tap millions of unbanked users, with the telcos earning a fee from interest paid on the loans.

Airtel last year signed a similar deal with micro lender Faulu Kenya while Safaricom partnered with Commercial Bank of Africa to offer small loans under the M-Shwari product.

AFB will be lending Airtel subscribers between Sh2,000 and 30,000 payable over a period of six months, which will be mainly for purchase of goods already identified. The interest rate in the new service will be made public in the next four weeks when it is launched officially.

The credit firm is at the moment negotiating with an insurance firm that will act as a guarantor for the unsecured loans, cushioning it from defaults among low-income earners seen as risky borrowers.

AFB is targeting the more than five million Airtel subscribers to grow its loan’s book while Airtel anticipates that the partnership will help it grow and acquire new customers for its money transfer services. 

“This service will enable Airtel subscriber’s access affordable and instant credit to purchase merchandise and comfortably pay for the same over a period of up to six months,” Mr Johan Bosini AFB managing director said during the signing of the partnership on Wednesday at Norfolk Hotel in Nairobi. 

He added that the lending would be offered to customers without security like savings with their airtime consumption patterns and use of Airtel’s money transfer service being tools of credit appraisal. Safaricom’s M-Shwari requires savings on the account before credit is advanced.

Airtel Kenya managing director Shivan Bhargava said that the AFB and Faulu partnerships differ but refused to provide information, saying this would be made public at the launch.  

“The two partnerships differ quite a bit but that information will be provided later because if I do so now I would have leaked our strategy,” said Mr Bhargava. “The partnership will ensure that our customers easily access meaningful services from AFB through convenient channels.”

He also declined to identify the kind of products that Airtel subscribers can access on credit saying it was still premature.

In the Faulu partnership, subscribers to Airtel Money get loans ranging between Sh100 and Sh10,000 through the their handsets. The loans are repayable after 10 days.

Safaricom has also launched a similar product that allows subscribers to buy solar products on hire-purchase.