Safaricom’s mobile loan terms stir online debate

Safaricom is on the spot due to subscriber complaints that the telco is deducting money from their M-Pesa accounts to settle outstanding debts of other users.

Some subscribers last week took to social media complaining that the service provider had deducted money from their M-Pesa accounts after they bought airtime for other subscribers with an outstanding Okoa Jahazi loan.

“Today a customer asks me to buy him bundles and I buy worth Sh50, then you deduct Sh275 from my M-Pesa account,” one user who identified themselves as Lovely Lovel posted on the firm’s Facebook wall.

In response, Safaricom explained that the user had given their consent for the loan to be debited from their M-Pesa account through the service’s USSD prompts.

“When purchasing data for a number with Okoa Jahazi, you will be given a breakdown of the bundle cost and the due Okoa Jahazi, then the total deduction,” Safaricom explained through its Twitter handle.

“If the recipient has an outstanding Okoa Jahazi, it will notify you and prompt you to either accept or decline if you do not intend to pay,” the firm explained.

The issue has, however, sparked debate over the fine print in the terms and conditions of mobile credit facilities, currently relied upon by millions of subscribers.  

“Expecting a third party to pay someone’s loan simply because I am buying them bundles is sneaky, to say the least,” said Mr Ali Hussein, an ICT lawyer and official at technology lobby Kenya ICT Network (KICTANet).

“Exposing my liabilities to a third party is ethically wrong whether I’ve accepted through the terms of conditions or not.”

Safaricom’s Okoa Jahazi service allows eligible prepaid subscribers an advance of airtime of between Sh10 and Sh1,000 with a 10 per cent service fee charged for each request.

According to the terms and conditions, users are required to repay their airtime advances within three days of receiving it or be barred from the service for one week.

Digital borrowers

“Safaricom reserves the right to withdraw the credit advance from any particular subscriber at any time and to vary or amend any element of the credit advance at any time without further notice,” explains the firm in the Okoa Jahazi terms and conditions. 

Mobile loans have grown in popularity in Kenya, with the latest report from the Central Bank of Kenya (CBK) indicating that 26 per cent of Kenyan subscribers are digital borrowers.

Last year, 17 per cent of mobile service subscribers reported having taken loans in the previous three months.

Mobile lending service providers rely on analysing transactional data such as the amount of money sent or received, day and time and repayment periods to develop subscribers’ risk profile.

Earlier this year, CBK Governor Patrick Njoroge called for more regulation to tame predatory lending by fintech (financial technology) service providers that have grown from a handful less than three years ago to almost two dozen.

The Communications Authority of Kenya (CA) has similarly called for new guidelines on the regulation of fintech products that traverse the mandate of several regulatory bodies.

“We have been deliberating with the CBK on the modalities of forming an inter-disciplinary unit between ourselves to help with the regulation of services that overlap several sectors,” CA Director-General Francis Wangusi explained last year.