JAMILA’S MEMO: Fuliza and other short stories

I am sure many of us have told someone ‘usitume pesa kwa hii namba niko na Fuliza, tuma kwa hii nyingine,’ right? Well, it turns out that between April and September this year, over Ksh.240 billion was borrowed from Fuliza, with 700,000 Kenyans registering for the overdraft facility. Yaani, hauko pekee yako ukisema ‘tuma kwa hiyo nyingine.’

The disruptions and massive loss of income caused by COVID-19 has forced so many Kenyans to use this short term borrowing method to meet basic needs like food and rent. But this is slowly turning us into a debt-dependent society. Safaricom’s latest half year results have revealed so much more on Kenyans habits.

The repayment of Fuliza debts is at 99% because, as we all know, pesa zinaingia kwa simu na hivyo hivyo zinatoka kulipa hilo deni. This means the debt is settled instantly when money is received in the phone wallet. This means during the period of April to September 2021, Ksh.240.2 billion out of Ksh.240 billion that was borrowed was paid.

Yes, there is more ease in accessing money these days as compared to traditional bank loans and even borrowing from shylocks. Many businesses have been able to survive using such fast and convenient services. Unakopa asubuhi na unalipa jioni baada ya kukamilisha biashara ya siku.

While Fuliza may be doing well in terms of repayment, the rest of the digital lending market is not a rosy picture. A survey published by the global financial inclusion lobby cap, raised the alarm over the risk of many borrowers becoming over-indebted. The survey found that at least 14 per cent of digital borrowers were repaying multiple loans from more than one provider at the time. This suggested that nearly one million Kenyans were juggling multiple digital loans, borrowing here to pay there. 

About 50 per cent of those surveyed admitted to being late with repayment at least once and about 13 per cent said they had defaulted on their loan at least once. Further, more than half of digital borrowers reported raiding their short and long term savings to pay back a loan while 20 per cent reported reducing food purchases and another 16 per cent reported borrowing from family and friends to repay their loans.

The main reasons for late repayment were given as problems with business performance and losing a key source of income. Now, this over-indebtedness, experts have warned, could push many Kenyans into endless poverty traps. Further, who will forget the many stories of some of the digital lenders shaming their borrowers by calling their phone contacts, their family and friends and even publishing their names on social media. Further, some of the digital lenders have ended up reporting borrowers to the Credit Reference Bureau (CRB) for loans as little as Ksh.1,000 or less.

There is no denying the fact that these loans have helped many businesses get by during these difficult times. There is no doubt that millions of Kenyans have sorted out family emergencies using these easily available loans, but at the moment alarm bells must ring because of these disturbing revelations. Just how much regulation goes into the digital lending space? How do we ensure that Kenyans are not left at the mercy of digital sharks who will lure them into a bottomless pit of indebtedness through unsustainably high interest rates and high late payment penalties?

It is gratifying to note that there is a proposed piece of legislation that seeks to address some of these concerns, but ultimately it is the individual who goes on their phone to borrow and it is the individual who bears the brunt when the digital lender comes calling or when the CRB shuts the door on any future loans. This would be a good place to remember the old warning: look before you leap.