President William Ruto on Wednesday, September 28, announced that his administration was in the advanced stages of delisting over four million Kenyans who have been blacklisted through the Credit Reference Bureaus (CRBs).
Ruto stated that his government was working with stakeholders, including the Central Bank of Kenya, to develop a collaborative framework to repair the credit history of the affected Kenyans.
He added that those who stood to benefit from the changes, expected to be effected by November 1, 2022, stood at between four and five million Kenyans.
The head of state indicated that his government was keen on reforming the digital credit space while thanking Safaricom and its banking partners NCBA and KCB for reviewing the terms of the popular overdraft facility Fuliza before his administration intervened.
"The announcements you have made are in the right direction. I am also happy that 4 to 5 million Kenyans will soon be out of blacklisting by CRBs by November 1. The fact that they will now be out of that space is a very positive development.”
"I appreciate that we are having a conversation about hustlers. Before you announced these changes, I had actually been planning a meeting with you. I have been sent by your customers, and they wanted to change the dynamics of the relationship,” the president stated during the joint press event by three companies at the Norfolk Hotel, Nairobi.
Safaricom CEO Peter Ndegwa stated that Fuliza customers would enjoy a three-day grace period where they would not pay the daily maintenance fee for amounts of Ksh1,000 and below.
"Further, customers that drawdown Ksh1,000 and below shall enjoy a waiver on the daily maintenance fees for the first three days," the Safaricom CEO announced.
Ndegwa added that Fuliza draws of Ksh1,000 and below accounted for 80% of all transactions done by the 28 million customers who have opted in to Fuliza.
Between April 1, 2021, and March 31, 2022, the average fuliza loan size was Ksh345.20, down from Ksh446.20 in the previous 12 months.
CBK Governor Patrick Njoroge witnessed the announcement alongside KCB Group CEO Paul Russo, NCBA Bank Kenya CEO John Gachora, and outgoing Safaricom Chairman Micheal Joseph.
Gachora noted that new changes meant Fuliza included more Kenyans, especially those adversely affected by negative credit listing. He noted that 28 million customers had benefited from the product since its inception.
“Today, we are announcing changes to the proposition of Fuliza back to its original intent of short-term emergency financing. More than 70% of customers have positive listings across CRBs, which helps them unlock credit. Today is about not leaving the adversely listed customers,” the NCBA CEO stated.
Safaricom, together with its underwriters for the Fuliza overdraft facility, had earlier announced a discount of up to 40 percent - effective October 1, 2022.
In a joint statement, the three companies announced that they had slashed the daily maintenance fee by 40 percent. This means the daily cost of accessing Ksh101 to 500 will be Ksh3 - down from Ksh5.
Borrowing Ksh 501-1,000 will set you back Ksh6 daily - down from Ksh10. The daily interest rate remained unchanged at 1.083 percent per day.
Users borrowing Ksh1,001- and 1,500 - will pay Ksh18 - a 10% discount, while those who borrow Ksh1,500-2,500 will now pay Ksh20 after a 20% discount.
Those who seek to draw Ksh2,500-70,000 will get a 16.7% discount and pay a daily charge of Ksh25 - down from the current Ksh30.
Fuliza was introduced in January 2019 as a Safaricom product – with the support of KCB and NCBA, the underwriters.
The overdraft facility immediately gained nationwide popularity – lending a total of Ksh6.2 billion in the first month of operation. A total of 4.5 million customers also opted in within the first month of operations.
Last year, Safaricom reported that Fuliza customers borrowed 351 billion in the financial year ended March 2021.
In August 2022, Safaricom reported that Ksh290 billion had been disbursed in the six months ending June 2022. This translated to Ksh1.6 billion disbursed daily.
Financial experts have pointed to the convenience of accessing the overdraft – as part of the product’s access.
You do not need to make an application as with most credit products offered through Mpesa. Customers can instantly access the amount and repay it once they have cash in their Mpesa accounts.
The fuliza limit is calculated through analysis of Mpesa transactions - leveraging data from the over 25 million customers who use the financial platform.
However, the cost of the Fuliza overdraft has received criticism from a section of financial experts - citing the 1.083% daily fee as expensive.
The rate translates to an interest rate of 395.2% per annum.
A report released by audit firm Deloitte and data firm DataEQ showed that many Fuliza users regretted opting into Safaricom's Fuliza overdraft facility.
“While the bulk of neutral Twitter conversation pertained to comments about transactions and vendor promotion, some themes that had lower volumes of conversation were more emotive.
“For example, consumers frequently referred to the increase in loan uptake in Kenya, with many expressing regret in signing up for Fuliza loans,” the August 2022 report read in part.
President Ruto, alongside his running mate Rigathi Gachagua, constantly cited the high number of Kenyans relying on Fuliza as a sign of harsh economic times.
The duo promised to make changes that would facilitate the financial inclusion of all Kenyans - under their bottom-up economic model.
In his inauguration speech, Ruto doubled down on his campaign promise to streamline the Credit Reference Bureau (CRB) that has locked out millions from mainstream credit products after being blacklisted.
"Our starting point is to shift the CRB framework from its current practice of arbitrary, punitive, all or nothing blacklisting of borrowers that denies borrowers credit,” the President remarked shortly after taking his oath of office.
It is yet to be seen how different and consumer-friendly his proposed collaborative credit-information sharing system will be from the current CRB process.