Users of Kenyan operator Safaricom’s M-Pesa mobile money more than doubled borrowings from the overdraft-protection service Fuliza in the first half of the year, as the Covid-19 lockdown led to layoffs and pay cuts, according to a news report. Fuliza loans rose to KES 176 billion (US $1.6 billion) from KES 81 billion (US $740 million) in the same period a year earlier, indicating daily borrowing of KES 967 million (US $8.8 million). The increase took place as the economy shed 2.23 million jobs amid sluggish corporate earnings due to Covid-19.

Fuliza is an M-Pesa-based overdraft platform that allows subscribers to complete M-Pesa transactions when they have insufficient funds. The service is underwritten by KCB Group and NCBA Group, which already had partnerships with Safaricom to offer short-term loans via M-Pesa. NCBA has said it lent KES 132 billion (US $1.2 billion) through Fuliza from January through June, while KCB Group disclosed loans worth KES 44 billion (US $402 million).

The debts are repaid M-Pesa balances automatically, but subscribers who do not settle their overdrafts within 30 days are barred from using their unused credit limit until they pay the outstanding amount.

Tarifica’s Take

While the Covid-19 pandemic has had a ruinous effect on economies all over the world, from corporate revenues to individual jobs, the present example shows how certain sectors have actually found revenue opportunities in the changed circumstances.

When Safaricom created M-Pesa, it made the transition from being simply an MNO to being a player in the financial sector as well—a very major player, indeed, considering that M-Pesa was a pioneer and leader in mobile money across the Middle East and Africa. Subsequently, by partnering with two financial firms, Safaricom enabled itself to become a lender and thereby keep customers active in its mobile money service even if their access to funds is disrupted. This functionality of Fuliza is in line with the mission of M-Pesa, which is to provide access to funds for those who do not have bank accounts or credit.

With the job loss brought about by the pandemic, the customer base of M-Pesa, which was for the most part already in some degree of financial need, is now in even greater need. The more than 100 percent increase in Fuliza loans from the prior year indicates clearly that the pandemic has transformed this particular market sector. The partner lending institutions as well as Safaricom itself can help customers while bringing in revenue for themselves, and the operator, by keeping those customers active within M-Pes, can safeguard their subscriptions even during the worst of times, ensuring that they will continue to be customers after the pandemic is over.