Kenya Airtel ventures into loans

Airtel Kenya this week launched a mobile phone loan facility in partnership with Faulu Kenya, a microfinance provider.

Subscribers to Airtel Kenya’s mobile phone money transfer service, Airtel Money, will get loans ranging from Sh100 (USD 1.2)  to Sh10,000 (USD 120) through their handsets as the telecommunications firm seeks to grow revenues by launching new products.

Airtel Kenya will provide the mobile phone money transfer system, while Faulu Kenya be appraising and lending money to applicants. The loans will be repayable after 10 days.

Interest charges range between three and 10 per cent, with higher values attracting lesser costs.

All Airtel money subscribers who have been on the service in the past six months are eligible to apply for loans, in the new service dubbed ‘Faulu Airtel Kopa chapaa Service.’ The borrowers need not be Faulu Kenya customers.

The applicants’ debt-repayment history will be cross-checked with the Credit Reference Bureau (CRB), disqualifying those who are already black listed.

Airtel Thursday said it intends to tap into the vast customer base provided by Faulu Kenya to ease the access of its mobile money services, especially in the rural areas.

Airtel has 6,000 agents across the country against Safaricom’s Mpesa which has more than 35,000.

The majority Indian-owned firm intends to tap into Faulu’s 14,000 agents across the country to tap more subscribers.

Central Bank of Kenya data shows that by December last year, Safaricom had 15.21 million mobile money customers making it the largest mobile money transfer service, followed by Airtel which had 3.16 million customers.

Yu had 520,000 customers compared to Telkom Kenya’s 130,000, MobiKash 110,000 and Tangaza 70,000.

Airtel expects to make money through commissions that it will be charged on withdrawals. Airtel Money charges Sh15 (USD 0.2)  to withdraw Sh100 and Sh75 (USD 0.88)  to withdraw Sh10, 000. Faulu will seek to make money on the interest charges.

Airtel subscribers will apply for the loan from the convenience of their mobile phones by dialing *305# and following the menu.

Faulu Kenya managing director, John Mwara, said Faulu is exploiting technology to scale up its reach to the unbanked and semi banked by reducing costs of transactions, improving on convenience and ease of access.

“This innovation, when backed by an effective credit reference bureau, will complete mobile banking by ensuring offering of micro deposit mobilisation which Faulu already offers through Airtel money,” said Mr Mwara.

“We have put aside enough cash reserves for this and expect to be transferring an average of Sh1 billion to Sh1.6 billion daily within the next four months and an average of Sh4 billion by the end of the year.”

He added that the Kenya’s rural environment is characterized by poor communications infrastructure, relatively low population density, low levels of literacy and relatively undiversified economies and as such it is only the use of such technology platforms that can increase financial inclusion.

Airtel partnership with Faulu comes on the background of Central Bank of Kenya CBK report that shows that although transfer of money from person to person is still dominant, there is an increased use of mobile phone services by corporates.

Data from the CBK show that in the month of December 2011 alone, M-Pesa moved Sh116.6 billion (USD 1.37 billion) , miles ahead of Tangaza’s Sh1.31 billion (USD 154 million) , which is about three times the combined share of the other four rivals for that month.

Airtel Money transferred Sh420 million (USD 4.94 million) , Orange and Yu Sh20 million (USD 235,000)  each while MobiKash handled Sh4 million (USD 47,000).

Posted in MobileMoneyAfrica.com