The overdraft service, Fuliza, has continued earning Safaricom billions of shillings since its inception. From September 2020, the service had recorded up to 149.4 billion shillings in overdrafts, thanks to the COVID 19 pandemic, which saw thousands of sacked and anticipated pay cuts.
These overdrafts rose from up to 112.2 billion shillings in a similar duration in the previous year. The trend pointed out at a daily borrowing rate of up to 830 million shillings. The borrowing trend emerges when Kenya’s economy has cut off over two million jobs already, courtesy of the hardships that come with the COVID 19 pandemic. Firms have been recording losses since the on-start of the pandemic.
Nonetheless, the application for M-Shwari loans declined by 14.3% in the last six months, up to 47.5 billion shillings. This indicates that the giant telecommunication company, alongside its partners, was quite strict on giving out loans. Fuliza overdraft loans are recovered from M-Pesa almost automatically. But for M-Shwari loans, borrowers will most likely be persuaded to clear their loans.
As such, borrowers are still allowed to hold the money in their M-Pesa accounts and even do transactions, notwithstanding their loans. But the lending structure in M-Shwari is pretty much the same as Fuliza overdrafts, for it is centered on the need to counter defaults. The rise in uptake of Fuliza overdrafts is attributed to the economic changes, whereby the economy has lost over 2.23 million jobs, leading to a reduction of cash.
In December last year, the Kenyan workforce’s number already on the payroll reduced from 18.1 million to 15.87 in June this year. In a move to curb loan defaults, Safaricom joined hands with NCBA to increase the minimum loan amount.
M-Shwari lending amount increased four-folds to 2,000 shillings. The move is anticipated to curb defaults among borrowers who might borrow smaller loans from other lending services on Safaricom. Subscribers who don’t qualify to borrow a minimum of two thousand from M-Shwari have been given the option to use Fuliza. However, this will be more expensive than borrowing from M-Shwari.