(Xinhua) -- While buying
printing papers for his computer in Nairobi on
Wednesday, Kenyan Abel Mundia realized that he had
less cash in his mobile money account, therefore, he
could not complete the transaction.
rims of papers cost him 900 Kenyan shillings (8.8
U.S. dollars) but he had only 7.5 dollars, after
having bought some airtime that reduced his mobile
But he did not panic, he reached his phone and
took an overdraft loan of 5 dollars using a new
service named Fuliza by telecommunication firm
Safaricom, and completed the transaction.
"It was the first time I was using the service
and I was really amazed since I always avoid digital
credit whenever I can because of the high fees,"
said Mundia on Thursday.
Unlike the other lending apps which one must
enroll to borrow cash, with the new service launched
by Safaricom two weeks ago in partnership with the
Commercial Bank of Africa, one only needs to be a
mobile money user to access the service.
Fuliza is the latest entrant in Kenya’s
fast-growing digital credit sector as competition
stiffens in the nascent industry and players
innovate to stand out.
It targets small businesses, people paying for
goods and those sending cash, therefore, promises to
be a game-changer as the firm seeks to reach its
nearly 25 million mobile money M-Pesa users.
As Safaricom goes for all its M-Pesa subscribers
and seeks to boost small and medium-sized
enterprises through the overdraft loans, other
innovative products in the sector include a
Shariah-compliant lender, a lending app targeting
farmers only and one to help insurance subscribers
pay their premiums on time.
The innovativeness is making the various lenders
stand out in the crowded field that had about 50
service providers by the end of 2018.
Besides the telecommunications firms, other
players in the industry include banks and
independent service providers.
Steve Wafula, an analyst with Soko Investment,
noted that the vibrant digital credit sector is set
to give banks a run for their money.
"With multiple transactions daily, my bank cannot
give me even a one-dollar overdraft but I can now
get up to 500 dollars through digital credit.
"No collateral, no paperwork, Kenyan banks are
facing serious competition here," he said.
He observed that mobile loan service providers
have studied the gaps in the banking sector and are
"In the case of Safaricom, M-Pesa has officially
become a digital bank, giving loans of up to 500
dollars without paperwork and collateral.
"This is a revolutionary aspect in the need to
access loans by the informal sector," he added.
Interest rate on digital credit is between 10
percent and 15 percent per transaction, unlike
banks’ 13 percent per year, but it is clear that
this is not a hindrance to borrowers who for years
had starved for loans.
But even as the digital lenders take the fight to
banks, Kenyan banks are not sitting pretty.
They are also emerging as one of the biggest
beneficiaries of the technology.
The financial institutions have not only widened
their loan portfolios but also their customer base
through the technology, reaching low-income earners
like motorbike taxi operator David Kiarie, who would
ordinarily not walk into a bank and take a loan.
Kiarie, who is based in the east of Nairobi,
recently borrowed from two banks through their
digital credit platforms to start a grocery shop for
his wife, which is slowly picking up.
"I borrowed from my bank and another, some 40
dollars and gave the money to my wife," he said,
adding he has since repaid the loan from his bank
thanks to the weekly deposits made in his savings
Last week, Barclays Bank announced that it is
currently receiving about 10,000 loan applications
per day thanks to their loan app, up from 5,000
applications per month before embracing the
technology. It is the same case for the rest of the
Kenyan banks having the apps.