Fuliza craze squeezes rivals from microloans business


Safaricom Ethiopia has identified cash dominance as a key barrier to growing its payments business. PHOTO | SHUTTERSTOCK

Safaricom’s popular Fuliza overdraft facility has squeezed other digital credit providers from the microloans market segment, disclosures by the competition watchdog show.

A credit market inquiry by the Competition Authority of Kenya (CAK) revealed that other digital credit providers have been gradually exiting the microloan segment by raising their loan sizes to customers in the backdrop of Fuliza’s entry into the market.

“While M-Shwari is the loan product most commonly used, Fuliza recorded the most active users, demonstrating its rapid expansion since being launched in January 2019. During this period, every other provider’s loans grew in size, suggesting a degree of market segmentation took place,” the CAK report observes.

Between January 2019 and March 2020, the entry of Fuliza shook up the digital credit market as the platform’s disbursements grew by 232 percent in the period while the value of total disbursements grew by 213 percent over the same period.

CAK observes that the overdraft product grew considerably over the period to become the largest digital credit product in the market while appearing to crowd out several competitors across the review period.

Other providers saw the number and total value of disbursements shrink while the average loan size for each of the respective providers increased.

Out of five other digital credit providers assessed in the survey, three marked a decline in the number of loan facilities disbursed while two marked a slump in the total value of disbursements.

All five digital credit providers marked an increase in the average size of loans by between 20.35 percent and 73.16 percent after which the average loan size increased to between Sh4,440 and Sh11,109. CAK did not provide the comparative loan size of Fuliza but indicated that it remained unchanged.

The competition watchdog reckons that the move has allowed Fuliza to expand its share of the lower-value loan market following the retreat by rivals.

In six months to the end of September last year, the value of disbursements made by the Fuliza platform increased by 32.8 percent to Sh419.2 billion from Sh315.6 billion previously as the number of distinct users hit a high of 7.5 million according to the latest disclosures by Safaricom.

The average ticket size of disbursements on the platform however fell by 18.7 percent to Sh260.70 from Sh320.90, mirroring the platform’s traction of micro-loans.

Safaricom’s earnings from the platform were however down by 40.3 percent at Sh2 billion from Sh3.4 billion following a tariff reduction in September 2022 which was aimed at increasing the usage of the product by customers.

The restructuring of the product’s fees saw the daily maintenance fee waived for customers that repaid in three days while other customers saw up to a 50 percent price reduction on the daily maintenance fee.

“In line with our purpose of transforming lives, we have reduced a free daily maintenance fee period for Fuliza transactions of Sh1,000 that is repaid within the first three days. This simple change will reset the use of the Fuliza service to its intended purpose,” Safaricom Plc chief executive officer Peter Ndegwa at the time.

The review was in part pushed by the then new administration as it sought to address concerns of Kenyans negatively listed by Credit Reference Bureaus and included a deal that saw customers who have defaulted on Fuliza facilities enlist in a credit repair program.

Fuliza allows M-Pesa customers to complete mobile money transactions when they have insufficient funds in their accounts.

The platform is co-run by Safaricom and lenders NCBA and KCB.

The trio dominates the digital credit market landscape which includes other products; M-Shwari and KCB M-Pesa.

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