Kenyan firm unveils mobile-phone loan service

Hot on the heels of Airtel’s launch of its mobile-phone loan service, private lending firm AVL Capital has unveiled a similar service offering loans at a cheaper rate than established banks.

AVL Capital’s ‘Pesa na Pesa’ SMS based service works across all service providers in the country and has been established in conjunction with tech firm Flexus Systems.

With the SMS-based service, users message a short code with the required amount and receive the loan through their mobile money provider. Interest rates range from 7 to 10%, which is significantly low compared to the 18% rate set by the Central Bank of Kenya - though the loan amount is capped at $117.

Andrew Kanyutu, group-managing director at AVLC, said the company was targeting daily transaction volumes of between $117230 and $175845, and plan to roll out the service in the rest of the region by the end of the year.

“The service gives several collateral options, making it more inclusive and easier to borrow money, alongside the usual verifiable repayment history and regular cash flow,” Kanyutu said.

“Shares listed on the NSE can be an asset to access the money you need, however we are still going to be background checking,” he said.

To use the service, users will be required to register and choose one phone number to connect to AVL’s core banking system. Funds can then be requested by an SMS short code and received via the user’s mobile money provider, such as M-Pesa.

AVL has also partnered with Chase Bank, who would run the disbursement platform, and is looking to extend the service to retail clients through partnerships with retail outlets. The company takes its funds from private equity.

“We try to establish a better customer relationship, so if someone is unable to pay we can find out why and try to restructure with the borrower,” he added.