Safaricom, NCBA, KCB mint billions as Fuliza loan sizes fall


A Safaricom's M-Pesa app user. FILE PHOTO | DIANA NGILA | NMG

Safaricom, NCBA and KCB are minting billions of shillings from their joint overdraft facility Fuliza even as the average ticket size of loans issued via the facility falls.

The latest data from KCB Group, which is one of the banks underwriting Fuliza loans, shows that the average ticket size of disbursements made under the facility across 2022 fell to Sh302 per loan even as the total value of disbursements rose by 29 percent to Sh124.4 billion from Sh96 billion in 2021.

Disclosures by Safaricom further capture the slowing size of Fuliza loans with the average ticket size falling 22.6 percent in the year ended March 2022 to Sh345.20 from Sh446.20 a year earlier.

The average ticket size fell further by 14.6 percent to a lower Sh320.90 from Sh375.80 in six months to September last year.

Shrinking of the average Fuliza loans comes on the backdrop of a 43.1 percent rise in the value of disbursements to a record Sh502.6 billion from Sh351.2 billion in the period to March 2022 and by 30.1 percent to Sh315.6 billion in six months to September.

At the same time, the number of distinct Fuliza customers has remained on a growth trajectory touching 7.4 million in September last year.

On its part, NCBA disclosed it had 17.1 million Fuliza customers in the quarter that ended September last year with the volume of disbursements standing at 2.25 billion loans valued at Sh1.2 trillion ($9.12 billion) since the inception of the overdraft facility.

Growth in the value of disbursements made via Fuliza alongside the number of distinct customers implies that more customers are using the product, but taking out smaller overdraft facilities multiple times over.

The high churn rate for Fuliza overdraft facilities has ensured that Safaricom, KCB and NCBA continue reaping billions of shillings in revenues from growing disbursements.

For Safaricom, which makes distinct disclosures on revenue specific to Fuliza, the telco booked Sh5.94 billion in the financial year ended March 2022, representing a 31 percent rise in income from Sh4.54 billion previously.

In six months to September last year, the leading telco made revenues of Sh3.4 billion from Sh2.8 billion in the previous comparable period.

Analysts have traced the shrinking size of Fuliza loans to a variety of factors including a reduction in customer loan limits owing to tough economic times and competition from other loan products.


“Fuliza ticket size could have been reduced from the reduction in the Fuliza limit due to late payment. We are still experiencing tough economic times and high inflation causing users not to repay their Fuliza loans on time,” said Frank Waruhiu, a financial analyst at Abojani Investment.

Other loan products including the recently introduced Hustler loans are also seen as rivalling Fuliza prompting the platform to have lower introductory ticket prices to outmuscle the competition.

“Other payment options like the free bank to M-Pesa transfers could have led to a lower Fuliza ticket size given users could have preferred free bank to M-Pesa transactions during the Covid-19 pandemic in the place of the Fuliza loans,” added Mr Waruhiu.

Launched in 2019, Fuliza is an overdraft facility created by Safaricom, in partnership with KCB and NCBA that enables customers to access an unsecured line of credit by overdrawing on M-Pesa to cover short-term cash-flow shortfalls subject to an applicable pre-determined limit.

“Customers who opt-in on Fuliza are charged a one-off access fee and daily maintenance fees on unpaid loan amounts based on a pre-determined matrix. Safaricom earns a proportion of the fee based on a pre-determined revenue share matrix with the revenue being recognized at a point in time,” Safaricom notes in its latest annual report.

In September last year, Safaricom and its lending partners cut daily charges for loans below Sh1,000 by 50 percent while introducing a three-day grace period after pressure by the government to lower charges on the popular credit service.

For Wesley Manambo, a research analyst with Genghis Capital, Safaricom’s remodelling of risk-pricing for individual customers has resulted in a lower average Fuliza ticket size as the telco and partners cover their exposure to risk.

“Safaricom and partner banks have been re-adjusting their risk-based pricing model to customers after looking at customers’ transactions on a money in, money out transactions basis with the view to cover risk exposure,” he said.

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