Kenyans Took 176 Billion Shillings In 6 Months As FULIZA

By Getrude Matayo

Due to imposed coronavirus-induced lockdown that led to layoffs and pay cuts in the country, Safaricom subscribers more than doubled their borrowing from the overdraft service Fuliza in the six months to June.

In the six months, Fuliza loans rose to 176 billion shillings from 81 billion shillings in the same period a year earlier, indicating a daily borrowing of 967 million shillings.

On Fuliza, borrowers pay a facility fee of 1.083 percent or 395.2 percent annualized, underlining the high cost of using the short-term credit services regularly.

This means a borrower who used to part with 56.25 shillings for a 1000 shillings M-Shwari loan will now be set back 243.68 for a Fuliza debt that lasts a month.

The rise on Fuliza loans emerged in a period when the economy shed more than two million jobs on the back of sluggish corporate earnings in the wake of covid-19 economic hardships.

Data from the credit reference bureaus (CRBs) shows that the accounts negatively listed had jumped from more than 2.7 million last year, a significant number of them linked to mobile digital borrowers of less than 1,000 shillings.

“People and businesses go for overdrafts when their cash flows are hit. The economic slowdown in the first half certainly triggered the demand for Fuliza”. Gerald Muriuki said.

He added that they have seen default rates rising and so the conventional loans have not really gone up. But given that Fuliza is integrated into M-Pesa credit, it is easier to manage the rates of default than conventional loans.

Due to covid-19 hardships that left many people in the country unemployed, this increased appetite for loans on the M-Pesa-based overdraft platform, which allows subscribers to access limited cash if their mobile wallets have no money.

According to NCBA, it lent 132 billion shillings through Fuliza in the six months to June while KCB Group disclosed loans worth 44 billion shillings on the overdraft feature. Fuliza allows customers to complete M-Pesa transactions when they have insufficient funds.

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The debts are recovered from M-Pesa lances automatically but subscribers who do not settle their overdrafts within 30 days are barred from using their unused credit limit until they pay the outstanding amount.

Workers on payroll or business dropped from a peak of 18.1 million in December to 15.87 million in June, reflecting significant business disruptions in the wake of the pandemic. Young people were the hardest hit by job cuts compared to their counterparts aged above 35.

In August, NCBA and Safaricom raised the minimum loan size on the mobile lending platform M-Shwari four times to 2,000 shillings in a move expected to reduce defaults largely by borrowers taking smaller amounts.

READ: Trouble For Borrowers As Banks Resume Listing Defaulters On CRB