Safaricom launches Sharia-compliant five percent mobile loan

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Safaricom launches Sharia-compliant five percent mobile loan


Safaricom PLC headquarters in Westlands, Nairobi. PHOTO | DENNIS ONSONGO | NMG

Summary

  • Safaricom has partnered with Gulf African Bank to introduce a Shariah-compliant mobile finance service that will see the bank earn a five percent profit.
  • The bank will disburse the cash –up to a maximum of Sh20,000— and will recover the amount plus the five percent margin.
  • Halal Pesa is cheaper than the cost of taking loans on M-Shwari which is a partnership between NCBA Bank and Safaricom.

Safaricom #ticker: SCOM has partnered with Gulf African Bank to introduce a Shariah-compliant mobile finance service that will see the bank earn a five percent profit.

The bank will disburse the cash –up to a maximum of Sh20,000— and will recover the amount plus the five percent margin.

The repayment period is 30 days on the platform dubbed Halal Pesa and which is built out of the telco’s mobile money platform M-Pesa.

Islamic banks do not charge interest and instead levy a margin or profit.

Halal Pesa is cheaper than the cost of taking loans on M-Shwari which is a partnership between NCBA Bank #ticker: NCBA and Safaricom.

M-Shwari customers pay a fee of 7.5 percent and 1.5 percent excise duty. M-Shwari also allows clients to save money while Halal Pesa specializes in financing.

All M-Pesa customers can access Halal Pesa as a mini App. Customers will initially be provided with a personalized facility limit based on their M-Pesa usage. The limit can be increased based on a customer’s usage of Halal Pesa.

“Halal Pesa becomes the first Shariah compliant mobile and digital financial solution in the country,” Safaricom said in a statement.

“Customers accessing financing through the service will receive the amount requested in full with a repayment period of 30 days at five percent commodity Murabaha margin.”

Murabaha refers to cost-plus financing where the customer and the bank agree on the margin.

The service offers Safaricom an opportunity to reach millions of Muslims with M-Pesa’s credit capability, with the platform’s earlier derivatives locking them out due to charging of interest.

“Our current strategy is focused on digitization for financial inclusion. Our aim is to provide instant access to interest-free credit through Halal Pesa, ”said Anuj Mediratta, Deputy CEO at Gulf African Bank.

The bank’s managing director Abdalla Abdulkhalik said uptake of M-Shwari in Muslim-dominated regions like Mombasa, Lamu, Malindi and North-Eastern areas has been low because the service did not conform to the faith.

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