Vodacom’s self-proclaimed super app – VodaPay – has new features this morning via its VodaLend offering.
Customers using VodaPay can now request a cash advance with amounts starting at R50 and going up to R500. Customers also have the option to settle this loan in seven, 14, 21 or 28 days.
“In addition to regulatory requirements for affordability verification, the credit decision process is enhanced by also looking at a Vodacom customer’s charging and payment behavior. This ensures that the service is accessible to more people, including new borrowers who can now enjoy the benefits of a secure and regulated lending solution. Once approved, the money is advanced directly into the user’s VodaPay wallet,” Vodacom explained in a press release.
The idea here is to give more South Africans a way to build a credit history. As you may know, not having a credit report prevents you from accessing a variety of financial services and products.
“This innovative product is a potential game-changer, as it has lower fees than traditional short-term cash advance providers. On average, it’s up to 400% cheaper than using a mashonisa [loan shark/money lender] – it takes us beyond financial inclusion towards real financial impact,” says Mariam Cassim, Managing Director of Vodacom Financial Services.
Now we need to discuss the issues with payday loans like these.
The fees and interest rates associated with these types of loans are generally higher than almost any other type of loan. Vodacom did not specify what those charges would be, but we have filed a request for that information. If Vodacom responds after press time, we’ll be sure to update this story.
We think it’s a good solution from Vodacom though. Yes, loans can put people in debt and lenders have a responsibility to lend to people who can afford that debt. However, as Vodacom points out, with only 26 million South African consumers having a formal credit record, solutions like this are needed.