How mobile money hire purchase is becoming attractive in kenya

Many young people in Kenya have purchased high-end smartphones via installment payments. The term “hire purchase” would have been used by the elder generation. But the new breed of financiers refer to it as BNPL, or Buy-Now-Pay-Later.
Consumers who use BNPL, a form of short-term financing, can pay for things over time after making an upfront payment. Two BNPL products were introduced on Tuesday, giving consumers who are struggling with sky-high inflation the option to buy select items but pay over time.
“In Kenya, where taxes are high, net disposable income will be most negatively impacted. Therefore, it is crucial for customers to have options for making payments over time,” according to Shehryar Ali, country manager for Mastercard in East Africa.
A BNPL startup called Lipa Later and Mr. Ali’s MasterCard collaborated to introduce a short-term lending solution that primarily targets retailers.
On the other hand, Craft Silicon, a technology company that also owns the ride-sharing business Little, introduced Get Now Pay Later (GNPL), their own version of BNPL.
Safaricom introduced its zero interest credit program for purchases of items up to Ksh 100,000 last week. More than 32 million Safaricom subscribers will be able to use the service to make credit-based purchases from merchants using the telco’s Lipa Na M-pesa platform.
Customers will be able to make zero-interest purchases between Ksh20,000 and Ksh100,000 and finish the payment within 30 days.
Last year, Lipa Later and Telkom collaborated to make it possible for Kenyans to buy cellphones on loan. Lipa Later received a Ksh1.36 billion financial infusion from a group of investors.
Select phones from manufacturers including iPhone, Nokia, Oppo, Realme, Tecno, Ulefone, Vivo, Xiaomi, Huawei, Bontel, and Itel have been made available to consumers thanks to this relationship.
BNPLs do not charge interest, in contrast to credit cards, which do. But there’s a catch. Instead of paying for the product quickly, the customer ends up paying more.
MasterCard, which is well-known for distributing physical credit cards to over 85 million retailers worldwide, would like to see the service it launched with Lipa Later become a type of virtual credit card that runs on mobile devices.
Only consumers with bank accounts are targeted by Spotit, a provision that not only promotes financial inclusion but also allays worries about prospective defaulters.
In a statement, Craft Silicon stated that Spotit “emphasizes that the GNPL product targets existing customers within the banking ecosystem, ensuring a carefully considered scoring process.” This was done in response to worries about prospective defaulters.”
Additionally, with the assistance of the partner merchants, the facility will be collateralized, enabling effective repossession in the event of default.
Spotit uses established commercial bank channels for credit scoring, while MasterCard and Lipa Later announced they will use machine learning to identify defaulters.
With many Kenyans having trouble repaying their digital loans, especially Fuliza, an overdraft facility, defaults have become a major source of worry.
For Kenya, where BNPL adoption has been slow, an increase in adoption could seem like a credit card moment.