The other day I told you how you can redeem your Safaricom Bonga Points for cash, and the story doesn’t end there. A young 23 year old Kenyan Entrepreneur going by the name Victor Raini doesn’t want you to redeem the bonga points for cash, but rather wants to give you loans secured by your Safaricom Bonga Points as the only security you’ll ever need.
In September, Victor Raini started an online platform where those in need of quick cash for up to shs 2000 can run to to get help. But just like Safaricom’s Mshwari that lie to borrowers that they do not charge interest, Victor also states that there is zero interest on the Safaricom Bonga Point based loans except for a one off 10 percent processing fees. Speaking to Business Daily a few days ago, Victor noted that “There is still a huge financial gap for lending so the product aims to add to the existing options available for borrowing. “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.”
To secure shs 500 loan, the borrower will need to have accumulated no less than 3,500 Safaricom Bonga Points as one shilling requires seven bonga points for collateral. This means Victor is valuing one bonga point at the rate slightly above shs 0.14. Compared to the rates from Onfon where one can sell a bong point for shs 0.15, Victor’s valuation is not that far off as he is only 1 cent expensive per bonga point.
By the time Victor was speaking to Business Daily, he had lent out shs 17,441, processed 13 loan applications, and had incurred zero defaults. “The final year student at Egerton University disclosed that he started the business with a capital of Sh40,000 from his personal savings”, Business Daily reported.
In his Express Lenders website, Victor states that they “are an online company aiming at closing the gap in the financial market for short term financing needs.” He goes ahead to explain that they “offer M-PESA loans with Safaricom Bonga Points as the only security needed.” The loans by Express Lenders are valid for thirty days, making the annual interest they charge on those loans be at 120 percent – meaning you should stay away from them as you possibly can (see the article Mobile Money Loans are money fleecing schemes as KCB MPESA increases interest rates to 72 percent).
The reason it is more expensive to transfer bonga points to Express Lenders as security is so that they can avoid a situation where people decide to dump their bonga points in exchange for money. If one would decide to default repaying the loan, then Express Lenders will simply redeem the bonga points for valuables from Safaricom or sell them for shs 0.15 per bonga at Onfon, making a cent in profit per point in the process; which would be shs 60 lower compared against a potential monthly interest of shs 200 on a shs 2000 loan.
Let me ask you a question, under what circumstances would you need to borrow money from Express Lenders at the rate of 10 percent, yet the mere fact that you have accumulated the required bonga points means you qualify for Mshwari loan that will charge you only 7.5 percent?