Safaricom, the largest mobile network operator in Kenya, has made a significant change to its popular overdraft service, Fuliza. Users of the service are now able to make direct cash withdrawals from M-Pesa agent stores, marking a departure from the previous mode where the service was restricted to payments.

A spot check by the Business Daily showed that customers are able to withdraw money equivalent to their Fuliza limit, less the normal transaction charges, as they would if they had an actual balance in their M-Pesa wallets. For example, a customer with an overdraft limit of Sh500 (Kenyan shilling) can walk to an M-Pesa agent with zero account balance and withdraw Sh473 as a kSh27 withdrawal fee is charged.

Since its launch in 2019, Fuliza has only allowed users to make payments via till and pay bill numbers, as well as send money to other M-Pesa customers when they do not have sufficient balances in their wallets. However, this new development transitions the facility to mirror a loans scheme, even though the telco insists it is not, arguing that it differs from products like KCB M-Pesa and M-Shwari.

The move comes just over a month after the government rolled out a credit facility to empower small-scale traders through the much-publicized Hustler Fund, pointing to Safaricom’s renewed efforts to shrug off competition in the mobile credit space. Christopher Mwangi, a user of the facility who works as a site clerk at property developer Mahiga Homes Limited, sees the move as timely, coming at a time when banks have re-introduced mobile banking charges. He said it would save customers the costs when paying for goods through bank pay bill numbers.

Fuliza, underwritten by lenders NCBA Group and KCB Group, has become a popular service since its launch, with amounts borrowed maintaining a consistent rise over the years. During the six months to June last year, borrowings from the overdraft service rose by 30.7 percent to hit Sh288 billion compared to a similar period in 2021 when the amount disbursed was Sh220 billion. During the first half of 2020, the amount stood at Sh176 billion.

Mobile loans in Kenya have been making strides since 2020 when the economy was hit by the Covid-19 pandemic that led to massive job losses affecting household incomes. While the hard-hitting impact of the pandemic has gradually reduced, high inflation from the global shocks of fuel price jumps and the Russia-Ukraine war, coupled with biting drought domestically, has been weighing down the economy and businesses that had commenced the recovery journey.

As the loans uptake rises, so has the number of defaults, prompting the Central Bank of Kenya (CBK) to announce a credit repair framework in November last year that compelled mobile lenders to remove borrowers from negative listing on credit reference bureaus (CRBs) and improve their credit standing.

In conclusion, the new development in Safaricom’s Fuliza service now allows users to make direct cash withdrawals from M-Pesa agent stores. This change mirrors a loans scheme, even though the telco insists it is not. The move comes as a response to the recent re-introduction of mobile banking charges by banks and to compete in the mobile credit space. The service has been gaining popularity over the years, however, as the loan uptake rises, so has the number of defaults. This has prompted the Central Bank of Kenya to announce a credit repair framework to improve the credit standing of borrowers.

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