Fuliza will have beneficial impact on Mpesa – Analysts

In January 2019, Safaricom unveiled the country’s first mobile-based overdraft facility branded – Fuliza. The service allows Mpesa users to transfer money and make payments when their Mpesa accounts have insufficient funds.    

Fuliza is offered by Safaricom in partnership with two banks; KCB and CBA group. The three firms’ revenue share agreement states that Safaricom, CBA group, and KCB group get 40 percent, 40 percent and 20 per cent respectively.

Nairobi based stock broker Sterling Capital estimates that the overdraft facility could lend about Sh 200 Billion in 2019 which would generate revenues of Sh 21 Billion. Safaricom is expected to earn about Sh 7.4 Billion from the deal.  

Safaricom’s overdraft service recorded rapid growth in the first month of operation by gaining 4.2 million customers and advancing KSh6.2 billion. A report by researchers at Sterling capital predicts that Fuliza will have beneficial impact on Mpesa’s “transactional volumes, revenues, customer acquisition as well as retention.” The researchers expect Fuliza to change the landscape in digital payments.

Fuliza is one of many digital credit facilities offered by banks and FinTech companies in Kenya. The digital lenders capitalize on Kenya’s high rate of mobile penetration and strong demand for small, easily accessible credit

Sterling Capital analysts project Fuliza will have 10 percent monthly growth rate in customer numbers and value of overdraft advances. Mpesa subscribers are expected to grow by 6 percent annually. Given the growth in customer numbers; volume of transactions; and value of payments; Fuliza’s overall impact on Safaricom’s revenue is will be huge.

Central Bank data shows that mobile money payments are more popular than card payments in Kenya. In 2018, mobile money payments amounted to KSh3.98 trillion compared to KSh1.41 trillion worth of card payments. Safaricom is a major player in the field and with Fuliza, it is expected to cement its dominance in mobile payments.

Fuliza is unlikely to suffer defaults due to the auto-collection feature on Mpesa deposits. The facility faces possible regulatory restrictions although Sterling Capital analysts see a slim chance in that.

Related;

It is a Buy for Safaricom – CITI

Fuliza M-Pesa: How it Works

How is Fuliza different from Mshwari and KCB – Mpesa?