A Kenyan techie has unveiled a Bonga points-linked loan platform which gives customers microcredit using Safaricom’s loyalty points as collateral.
Victor Raini last September started an online portal which offers small loans of up to Sh2,000 via M-Pesa, with Safaricom’sBonga points as the only security needed.
The techprenuer said he charges a one-off processing fee of 10 per cent and the security needed for loans is calculated at the rate of seven Bonga points to borrow a shilling – meaning that to borrow Sh500, one needs 3,500 loyalty points.
“There is still a huge financial gap for lending so the product aims to add to the existing options available for borrowing,” said the 23- year- old founder of Express Lenders in an interview with the Business Daily.
“We chose Bonga points as security because it is available in an online system and has value which can be used to recover the loan in case of default in loan repayment.”
Mr Raini’s innovation offers Safaricom customers with a new window to monetise their Bonga points beyond redeeming them for talk-time (minutes), data, text messages and multimedia messages to merchandise such as smartphones and tablets.
The volume of Safaricom’s unredeemed Bonga points declined 14 per cent to Sh2.995 billion as at March 2015.
Safaricom’sBonga points programme was introduced in 2007 as a customer loyalty scheme to reward customers based on their spending on the network.
Subscribers earn one Bonga point for every Sh10 spent on voice calls, short messages service (SMS) data and M-Pesa services.
Borrowers apply for loans through a portal —www.expresslenders.co.ke — by offering Bonga points in return for loans which are processed in five minutes.
Mr Raini said he had lent out Sh17,441 so far and has processed a total of 13 loan applications and none has defaulted. The final year student at Egerton University disclosed that he started the business with a capital of Sh40,000 from his personal savings.
Express Lenders’ collateralisation of Bongapoints shows that it values the loyalty points at Sh0.16 cents per point.
This is lower than the value offered when exchanging Bonga points for Safaricom’s airtime, and MrRaini said this was done to avoid “dumping” of loyalty points. (10 points = 2 mins on-net)
Safaricom in 2009 disclosed in its annual report that Bonga points redeemed against airtime was valued at Sh0.12 per point while loyalty credits converted to merchandise was exchanged at Sh0.50 per point.
The Bonga points lending platform joins a list of other mobile-based loan apps.
JosphatNjui and Kenny Kinako co-founded Shield Finance to offer salary advances through M-Pesa to employed but cash-strapped persons.
Borrowers are charged a daily interest rate of 0.25 per cent on the salary advance, making it fair compared to what mainstream lenders charge.
The company, whose average loan size is Sh6,000, served its first client in April this year and has not had a single non-performing loan to date. The salary advance service is accessible through USSD, mobile and web.
The service is M-Pesa linked and targets employees earning low salaries. They do not need to own a smartphones to enjoy the service.
Shield Finance enters into an agreement with employers to provide employee data which is used to process salary advances.
Matt Flannery, a Silicon Valley-based techie, is taking on Safaricom’s M-Shwari with a new Facebook-linked mobile application which allows users to borrow and repay micro-loans via mobile money platform M-Pesa.
The co-founder of peer-to-peer lending platform Kiva, has launched the app dubbed Branch in Kenya, offering entrepreneurs small loans of up to Sh50,000 disbursed through M-Pesa and repayable in six months.
Mr Flannery said users need to download Branch from Google Play, log-in with their Facebook accounts and can begin applying for small loans charged a one-off fee of between six per cent and 12 per cent depending on loan and repayment period.
The Android app awards users a credit score by remotely analysing information such as calling patterns, mobile money transactions and Facebook behaviour, the California-based techie revealed.
The innovation has already processed about 20,000 loans since launching in Kenya in April. The average loan size is Sh4,000 according to Mr Flannery. Branch is seen as a head-on assault on banks’ mobile-based lending platforms such as M-Shwari, M-Co-op Cash, KCB M-Pesa, and Equitel.
Flannery said the app has already disbursed “nearly $1 million” and plans to expand Branch offerings to Tanzania and Uganda early next year.
At the beginning, Branch had a default rate of about 25 per cent of its loan book because he had |“ very little data,” Mr Flannery disclosed.
“Our “robot” learned very quickly how to manage risk and is improving each day,” he said putting the current non-performing loan portfolio at about seven per cent.