The cost of living in Kenya is driving many individuals to rely on short-term mobile loans to meet their needs, as evidenced by a 30.7% increase in borrowings from Safaricom’s overdraft service, Fuliza, in the six months to June 2022.

According to data released by the mobile network operator, the amount of cash disbursed on Fuliza hit Sh288 billion in the first half of 2022, up from Sh220.38 billion in the same period last year. This represents a consistent rise from Sh176 billion in a similar period in 2020.

The jump in overdrafts translates to a daily borrowing of Sh1.57 billion between January and June this year, compared to Sh1.2 billion and Sh972.3 million over a similar period in 2021 and 2020 respectively.

The overdraft service, which was introduced in 2019 and is underwritten by NCBA Group and KCB Group, allows customers to meet essential needs such as shopping, rent, sending money to friends and family, or paying for goods and services on the mobile money service, M-Pesa.

This rise in borrowing on Fuliza comes amid an increase in prices of goods and services, with inflation in Kenya reaching a 61-month high of 8.3% in July 2022, driven by soaring food and fuel prices.

NCBA Group CEO, Mr. John Gachora, attributes the jump in disbursements through Fuliza to a pullback from the digital loan platform, M-shwari, which recorded a 6% drop in loans borrowed over the same period. M-shwari disbursed Sh42 billion compared to Sh44.8 billion worth of loans disbursed over the same period in 2021.

“The growth on Fuliza tells us it’s not just new customers but also customers that use M-shwari opting to use easier credit available in Fuliza,” said Mr. Gachora. “A year and a half ago we noted that we had reached the maturity of M-shwari and indeed what we have seen in terms of disbursement is that this year we are six percent below where we were last year. This is just the maturity of the product and these are the numbers we could see after the organic of M-shwari. Part of that reduction may be because more people are opting to use Fuliza as opposed to M-shwari.”

The increase in borrowing on Fuliza can also be attributed to the impact of the COVID-19 pandemic, which led to massive job losses and affected household incomes. Although the pandemic’s impact has reduced, high inflation from the global impact of fuel price jump and the Russia and Ukraine war has been weighing down the economy and businesses that were just recovering from the pandemic.

“We have provided an enabling environment for businesses to continue to thrive by increasing our product portfolio and tailoring solutions to suit every customer’s needs, especially during this period which experienced challenges from the Russia-Ukraine war and risks emanating from the political calendar. Through our digital banking partnerships, we continue to provide much-needed financial relief to many families and small businesses,” added Mr. Gachora.

In total, loans disbursed through Fuliza and M-shwari at Sh320 billion represent 94.4% of the total Sh339 billion disbursed through all its digital products including Mpawa, Mokash, and Momokash in regional markets.

In conclusion, the high cost of living in Kenya has led to a significant increase in borrowings on Fuliza, Safaricom’s overdraft service. This trend can be attributed to the increase in prices of goods and services

Leave a Reply