NBFIRA probes Orange’s N’stakolle loan
Mbongeni Mguni - Pauline Dikuelo | Monday November 21, 2022 06:00
For weeks, Orange Botswana has been teasing a product known as “N’stakolle” which is apparently being offered to certain customers of Orange Money, the cellphone group’s widely popular mobile money wing.
While Orange is yet to formally launch the service, Orange Money users have reported being offered and taking up N’stakolle loans, which are a form of advance against their balances in the mobile money product.
This week, Orange Money representatives confirmed that uptake was already ongoing among users, with loans of between P50 and P1,200, interest rates of between 10% and 15% as well as repayment periods ranging from three to 30 days. For N’stakolle loans in arrears, Orange is charging users one percent per day on the original outstanding balance.
On Wednesday, NBFIRA CEO, Oduetse Motshidisi said the regulator had become aware of the credit product being offered by Orange and was probing the matter.
“That has come to the attention of the authority,” he told BusinessWeek during a media briefing. “Certainly if the entity you mentioned is doing some lending of the type that we have heard, there could be some problems with that. “That’s something we are investigating, something that we need more information about. “We certainly want to get clarity on that and the initial information has given mixed signals on that.”
NBFIRA’s director of lending activities, Ntema Modongo said the existing legislation gives the authority the powers to investigate the latest developments.
“If, and I emphasise the word if, the entity that has been mentioned is issuing loans, this would be a matter of enforcement,” she said. “This is a case that we are investigating. “There is a possibility that this could also be a case of white labelling rather than outright issuing of loans. “White labelling means that they are issuing loans either through a regulated bank or regulated micro-lender.”
Since 2020, the country’s mobile money operators have been regulated by the Bank of Botswana. However, the NBFIRA is still able to investigate certain instances where activities fall into its purview.
The N’stakolle loan has also reportedly unsettled some members of the traditional cooperatives savings sector, known more commonly as metshelo. Members of the sector say Orange’s new product directly competes with metshelo built around loans, by offering a 50% discount on the prevailing informal sector interest rates.
“It’s a typical example of big players coming down to eat small players’ lunch. “Most metshelo are between 25% and 30% per month and Orange is offering 15% per month. “Right now, most groups are closing for the year, so we’ll see the real impact of this next year when metshelo restart,” a member of a cooperative saving society told BusinessWeek on condition of anonymity.
Through their representatives, Orange officials declined to respond to BusinessWeek’s enquiries, without giving details on the reasons.
Orange Money’s extension into consumer lending underlines the aggressive expansion of non-traditional financial entities into the formal financial sector.
While banks used to enjoy near-exclusive control of payments, savings, and lending in the economy several years ago, entities such as Orange have leveraged their subscriber base and digitisation to extend services such as mobile payments and now lending. Platforms such as crypto have also provided alternative savings pockets for consumers.