Daily borrowing on Fuliza surges to Sh1.4bn as the going gets tough

Safaricom PLC CEO Peter Ndegwa

Safaricom PLC CEO Peter Ndegwa.

Photo credit: File | Nation Media Group

Borrowings from Safaricom’s overdraft facility hit Sh1.37 billion daily in the 12 months to March, signalling the financial pressures that have pushed many Kenyans to rely on short-term expensive debts.

The amount disbursed on Fuliza hit Sh502.6 billion in the year to March, translating into a 43.1 per cent increase from the Sh351.2 billion lent over a similar period the previous year. The jump in overdrafts translates into Sh1.2 billion daily borrowing between March 2021 and March this year, compared to Sh962.1 million over a similar period of the 2020/21 financial year.

The performance in the year to March means Kenyans tapped for Sh57 million hourly from Fuliza, which allows users to borrow and complete payments when their M-Pesa balance is depleted. Its convenience and flexible rates make it Safaricom’s largest single lending platform by more than 10 times, beating M-Shwari and KCB M-Pesa in all key metrics following its launch just in January 2019.

For context, the amount borrowed on Fuliza in the year to March is more than the Sh420 billion that Kenya borrowed to build the Mombasa–Nairobi section of the Chinese-funded and built standard gauge railway, underpinning an increasing dependence on borrowing over the rising cost of living.

The amount taken from the overdraft facility can also cater for the Sh370 billion the 47 counties will get as an equitable share from the national cake in the financial year starting July 1 with a massive Sh132.6 billion to spare. Further, the Sh502.6 billion borrowing from Fuliza in the year to March translates into 15 times the budget used to construct the Nairobi-Thika highway, which was inaugurated in 2012 after three years of construction.

The borrowing frenzy on Fuiliza came against a backdrop of tough economic times for many households.

The Economic Survey 2022 shows the average cost of 330 goods and services that are considered essential to living rose by 6.1 per cent last year, even as real annual average earnings by workers reduced by 3.8 per cent to Sh718,800 during the year, reflecting a growing struggle by households to meet their basic needs.

Fuliza is Safaricom’s most lucrative loan product with the best repayment rate, earning the telco Sh5.94 billion in revenue up from Sh4.54 billion, a 31 per cent growth.

In contrast, the loans borrowed from KCB M-Pesa fell by 9.4 per cent from Sh51.1 billion to Sh46.3 billion, while M-Shwari loans also fell by 8.9 percent to Sh86.1 billion from Sh94.5 billion, indicating a shift by borrowers from the two platforms to Fuliza.

Fuliza also recorded the best loan repayment rate of 101.5 per cent compared to KCB M-Pesa (97 per cent) and M-Shwari (63.2 per cent) owing to its model of automatic repayment once a deposit is made into a customer’s M-Pesa account.

The average single loan amount disbursed through Fuliza was reduced by 22.6 per cent to Sh345.2 from Sh446.2, indicating that its customers are largely from the low-income bracket that is increasingly using the facility to quickly settle low-value transactions. In contrast, the average loans disbursed through KCB M-Pesa and M-Shwari are Sh6,874 and Sh6,172 respectively.

Safaricom yesterday announced a 1.7 per cent profit drop of Sh67.49 billion for the financial year ended March, attributed to costs relating to the ongoing establishment of its Ethiopia unit that is in its first year of operation. The drop is Safaricom's second in a row after its net profit for the financial year ended March 2021 dropped by 6.8 per cent to Sh68.67 billion from Sh73.65 billion the previous year—driven by a sharp fall in M-Pesa revenues following a slash in mobile money transfer charges.

However, Safaricom Kenya posted a 5.4 per cent net profit growth during the year to Sh72.4 billion from Sh68.7 billion last year, driven by a rebound in M-Pesa revenue following the reinstatement of mobile money transfer charges in January last year. The company's service revenue grew 12.3 per cent year on year to Sh281.1 billion, supported by sharp growth in M-Pesa, mobile data recovery, and fixed data growth.

Safaricom Ethiopia recorded a loss after tax of Sh4.85 billion driven by staff and marketing costs of the subsidiary, which the telco expects to break even in its fourth year.

Safaricom board has recommended a final dividend of Sh0.75 per share amounting to Sh30.04 billion, bringing the total payout for the year to Sh56 billion. It had paid an interim dividend of Sh0.64 per ordinary share amounting to Sh25.64 billion.

Safaricom chief executive Peter Ndegwa confirmed that the company is in talks with the Communications Authority of Kenya (CA) for a licence for the roll-out of its fifth-generation (5G) network, which the telco aims to use to tap into the growing demand for super-fast internet.