According to a recently published report, Safaricom subscribers doubled their borrowings from the overdraft service Fuliza indicating a daily borrowing of Sh967 million.
When the President imposed a coronavirus-induced lockdown that led massive layoffs and pay cuts,
Fuliza loans in the six months to June rose to Sh176 billion from Sh81 billion in the same period a year earlier.
The jump in the uptake of the loans has been attributed to sluggish corporate earnings in the wake of Covid-19 economic hardships which facilitated a further uptake of loans on the M-Pesa-based overdraft platform.
“People and businesses go for overdrafts when their cash flows are hit. The economic slowdown in the first half certainly triggered the demand for Fuliza loans. We have seen default rates rising and so the conventional loans have not really gone up. But given that Fuliza is integrated into M-Pesa credit, it is easier to manage the rates of default than conventional loans,” said Gerald Muriuki, a research analyst at Genghis Capital.
According to NCBA, it has lent Sh132 billion through Fuliza in the six months to June while KCB Group disclosed loans worth Sh44 billion on the overdraft feature.
Reflecting significant business disruptions in the wake of the pandemic, workers on payroll or business dropped from a peak of 18.1 million in December to 15.87 million in June. Young people were the hardest hit by job cuts compared to their counterparts aged above 35.
Companies started reporting falling sales ahead of Kenya imposing restrictions covering travel, mass gathering and a dusk-to-dawn curfew to curb the spread of the coronavirus.
Even though the government announced phase reopening on July 6, lifting restrictions on travel in and out of Nairobi and Mombasa as well as allowing air travel to resume hasn’t triggered the rise in business activities, firms are yet to lift the freeze on hiring- instead, most firms are still issuing out job cuts.