Safaricom lends Sh1.3b daily as Fuliza gets 700,000 new borrowers

Peter Ndegwa Chief Executive Officer (CEO) Safaricom PLC. [Wilberforce Okwiri, Standard]

Borrowings from Safaricom’s overdraft facility rose to Sh1.34 billion daily in six months to September this year as economic hardships pushed 700,000 Kenyans to register for its Fuliza service.

The telco has disclosed that the value of disbursements via the service hit Sh242.6 billion in the six months, up from Sh149.4 billion that had been disbursed in a similar period last year. 

The jump in overdrafts translates to Sh1.34 billion daily borrowing between April and September this year—a 62.4 per cent rise when compared to Sh830 million in a similar period last year. 

An additional 700,000 customers have now joined the service to send the total number of daily active Fuliza users to 1.7 million. This came on the back of KCB M-Pesa and Mshwari—which are the other Safaricom-linked mobile loan products— posting declines in the value of loans and number of users.

The decision to tighten lending on these platforms that are owned by two listed banks has seen many Kenyans who are distressed by the negative effects of Covid-19 pandemic flocked to Fuliza.

Both NCBA, which owns M-Shwari, and KCB, which owns KCB M-Pesa, have a stake in Fuliza together with Safaricom. In August last year, NCBA and Safaricom increased the minimum sum to be borrowed from Sh500 to Sh2,000 to reduce defaults.

Instead, those who borrow Sh2,000 and below were shifted to Fuliza. Loans of small amounts are mostly for consumption. 

Safaricom introduced Fuliza service in 2019 and it has become popular among Kenyans in meeting essential needs such as shopping, rent, and supporting friends and family when there is insufficient money in their M-Pesa wallets. 

The telco says the average ticket size is Sh375.80. But the borrowing per individual could be higher since customers are allowed to take several overdrafts before repaying subject to the approved overdraw limit. 

A rise in short-term borrowings—mainly used to meet essential needs such as food and rent—signals a deep debt dependence following the massive loss of income witnessed in the economy in the wake of Covid-19 disruptions. 

The increased Fuliza overdrafts earned Safaricom Sh2.8 billion as revenue, being 32.2 per cent more than the Sh2.1 billion earned in a similar period last year. 

Safaricom charges Fuliza customers a one-off 1.083 per cent interest and a daily administrative fee that depends on the outstanding balance. 

The Fuliza fee starts from Sh2 per day for Sh100 overdraft and goes up to Sh30 per day for Sh2,500 and above. 

Customers who do not clear their Fuliza overdraft within 30 days are barred from utilising their unused Fuliza limit until they settle the outstanding amount. 

The default rate for Fuliza overdraft is usually very low since the debt is settled instantly when the customer’s M-Pesa wallet receives money. 

Safaricom disclosures show that Fuliza had a repayment rate of 99 per cent during the review period, meaning that Sh240.2 billion of the Sh242.6 billion had been paid.

But even as Kenyans flocked to Fuliza, activities at major mobile lenders were not as active.

During the review period, the value of KCB M-Pesa loans fell by 15.9 per cent to Sh22.9 billion as users declined by 500,000. M-Shwari loans dipped by 8.6 per cent to Sh43.4 billion while users shrunk by 900,000. 

The average loan on KCB M-Pesa was Sh9,070 while that on M-Shwari was Sh6,047. Safaricom earned Sh900 million from M-Shwari and Sh300 million on KCB M-Pesa. 

The three products have enjoyed increased popularity among Kenyans because of the ease of accessing the money as compared to the traditional bank loans or Shylock services.

The rise of Fuliza’s popularity is also due to muted activities by digital lending products such as the Silicon Valley–backed Tala and Branch, as well as Zenka, Opesa and Okash.

For some time, these platforms, which are not regulated, had been offering short-term loans via lending apps to Kenyans.

Central Bank of Kenya (CBK) Governor Patrick Njoroge, who has in the past linked digital lending to money-laundering and terrorism financing, in April last year barred the lenders from using credit reference bureaus (CRBs), effectively denying mobile-lending platforms a useful tool for assessing the credit-worthiness of potential borrowers. 

CBK also withdrew approvals granted to unregulated credit-only lenders as third party credit information providers to CRBs. “The withdrawal is in response to numerous public complaints over misuse of the credit information system by the unregulated digital and credit-only lenders, and particularly their poor responsiveness to customer complaints,” CBK said. 

“Thus, unregulated digital and credit-only lenders will no longer submit credit information on their borrowers to CRBs.”