CBK allows interest-free Lipa na M-Pesa loans plan

The Central Bank of Kenya (CBK) has finally cleared a Safaricom-backed zero-interest credit service for the purchase of goods for up to Sh100,000 after initially blocking the product that is expected to disrupt the mobile loans market.

The product dubbed Faraja will be launched later this month, ending nearly a year of waiting for regulatory clearance.

It is owned by EDOMx Ltd, a Kenya-based financial technology firm, with Safaricom and Equity Bank listed as its partners.

The CBK nod comes after EDOMx was cleared as a digital credit provider in March under regulations published last year that allow the central bank to regulate fintech to rein in predatory lending and violation of consumer privacy.

The product was set for launch on July 6 last year before the lapse of a September deadline that required the digital lenders to get a CBK permit for operation.

But a call from the CBK came in the afternoon before its launch, with clear directions that the product was under regulatory review and pending approval.

This forced EDOMx to call off the launch and Safaricom hurriedly pulled down from its websites the terms and conditions for Faraja.

Faraja will allow customers to buy goods and services from as low as Sh20 to a maximum of Sh100,000 with selected retailers like Naivas on credit and pay the same amount later, setting the stage for a disruption in a market where short-term loans come with fees and interest rates that top 400 percent when annualised.

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