Safaricom, NCBA, KCB mint Billions as Fuliza Loan sizes Fall

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

According to the most recent data from KCB Group, one of the banks underwriting Fuliza loans, the average ticket size of disbursements made under the facility in 2022 fell to Sh302 per loan, despite the total value of disbursements increasing by 29 percent to Sh124.4 billion from Sh96 billion in 2021.

Safaricom’s disclosures highlight the slowing size of Fuliza loans, with the average ticket size falling 22.6 percent in the fiscal year ended March 2022 to Sh345.20 from Sh446.20 the previous year.

In the six months to September of last year, the average ticket size fell by 14.6 percent to Sh320.90 from Sh375.80.

The average Fuliza loan has shrunk despite a 43.1 percent increase in the value of disbursements to a record Sh502.6 billion from Sh351.2 billion in the six months to March 2022 and a 30.1 percent increase to Sh315.6 billion in the six months to September.

At the same time, the number of unique Fuliza customers has continued to grow, reaching 7.4 million in September of last year.

NCBA, for its part, reported 17.1 million Fuliza customers in the fiscal quarter that ended September last year, with 2.25 billion loans valued at Sh1.2 trillion ($9.12 billion) disbursed since the inception of the overdraft facility.

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

Because of the high churn rate for Fuliza overdraft facilities, Safaricom, CBA, and NCBA continue to reap billions of shillings in revenue from growing disbursements.

Safaricom, which makes separate disclosures on revenue specific to Fuliza, earned Sh5.94 billion in the fiscal year ended March 2022, a 31 percent increase from Sh4.54 billion previously.

The leading telco made Sh3.4 billion in revenue in the six months to September last year, up from Sh2.8 billion in the previous comparable period.

Analysts attribute the shrinking size of Fuliza loans to a number of factors, including a reduction in customer loan limits as a result of the current economic downturn and competition from other loan products.

On-time

“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.

Fuliza, launched in 2019, is an overdraft facility developed by Safaricom in collaboration with KCB and NCBA that allows customers to access an unsecured line of credit by overdrawing on M-Pesa to cover short-term cash-flow shortfalls up to a 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.

Following government pressure, Safaricom and its lending partners reduced daily charges for loans under Sh1,000 by 50% in September last year, while also instituting a three-day grace period.

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

“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.