Safaricom CEO Peter Ndegwa. [Wilberforce Okwiri, Standard]

Mobile service provider Safaricom has announced a 50 per cent reduction in Fuliza tariffs in a move that comes as a reprieve for millions of borrowers in the country.

Safaricom, alongside lending partners NCBA and KCB Bank, said the companies are restructuring the facility starting October 1 to reduce the cost of credit on low income borrowers.

Customers making Fuliza transactions valued at less than Sh1,000 will enjoy a waiver on the daily maintenance fees for the first three days.

All borrowers will enjoy reductions in daily maintenance fees for transactions above Sh1000 and up to a maximum of Sh70,000. Safaricom CEO Peter Ndegwa said the changes affect 80 per cent of the current Fuliza transactions.

“The goal is to amend the features of the product back to its intended purpose; emergency short term credit,” he said.

“This will allow customers who currently use Fuliza, to complete more transactions while attracting more customers.” Safaricom said the changes cumulatively lead to a 50 per cent overall reduction in Fuliza tarriffs across the board. The facility will still maintain the access fees at the current 1 per cent across all transactions.

Since it’s launch in 2019, Fuliza has become the leading revenue earner for Safaricom’s M-PESA mobile money offering and continues to register significant growth in the number and volume of transactions. According to the company’s latest annual report, Sh502.6 billion was disbursed through the facility in the year ended March 2022, an increase of 43 per cent compared to same period last year.

Low risk levels

The product enjoys low risk levels, with 101.1 per cent repayment verses disbursal rate recorded in the last financial year.

Fuliza charges a daily fee of up to a maximum of Sh30 per day for each day the facility remains unpaid; which has been criticised as prohibitive to low income earners.

Fuliza has become the leading revenue earner for Safaricom’s M-PESA mobile money. [Wilberforce Okwiri, Standard]

KCB Bank and NCBA serve as the financial intermediaries for Fuliza and the two earn generous commissions on the fees collected on the facility.

Data from the latest annual report from NCBA group indicates that the lender has disbursed Sh1.06 trillion through Fuliza since the product was launched in 2019.

KCB Bank on the other hand reported a 32 per cent growth in Fuliza loans disbursed to Sh96 billion in the previous financial year becoming a key earner for the lender’s interest income.

“We are announcing changes to the Fuliza proposition with the goal of amending the features of the product back to it’s intended purpose; emergency short term credit,” said John Gachora, NCBA Group MD.

President William Ruto who was at the event welcomed the move urging the financial service providers to work with the government to avail credit to low-income earners at single-digit interest rates.

“I have been sent by your customers,” he said. “The people who cannot make it to your offices and to the negotiation table have sent me to you.” 

“Fuliza was a very popular word in our campaigns and I am happy that you were listening,” he said. “I am happy that between 4 and 5 million Kenyans will beginning of November be out of the black lists by Credit Reference bureaus, CRBs,” he said.

According to the CBK, the use of mobile money hit a historic high in December last year where Kenyans transacted Sh622 billion through their mobile phones.

CBK Governor Patrick Njoroge welcomed the move as a step in the right direction towards reducing the cost of low income earners. 

“This is but the first step in ensuring the cost is affordable and ropes more Kenyans into the financial services net,” he said.