The Sad Story of Kenyan Youth's Addiction to Fuliza Loans
Kevin Namunwa  |  Aug 21, 2020

The Kenyan economy is now at its worst as occasioned by the pandemic. It's evident that Kenyans are currently going through difficult financial times.

During these times, most Kenyans are vulnerable and will do anything to get the extra cent that will help them battle the pandemic.

Mobile loans have been famous in the country even before the virus. Young people in the country, specifically, have been at the forefront of taking and defaulting loans from mobile lending platforms. 

In the wake of the pandemic, many Kenyans are taking mobile loans. However, most of them fail to raise the money needed to pay back the loans resulting to higher interests or sometimes even having their sim cards blocked.

Safaricom’s Fuliza service is the most common mobile loan platform used among the Kenyan youth. Fuliza is linked to mobile money platform M-Pesa and is designed to deduct the outstanding debt automatically within 24 hours. Fuliza is famous because it offers small loans, unlike M-Shwari which only provides loans of not less than Ksh 2,000.

Fuliza loans have become so famous that M-Pesa agents are offering services in line with the lending platform. In multiple M-Pesa shops across the country, there are provisional numbers for Fuliza. This makes it easy for anyone to operate on the negative, paying loans, and taking other ones immediately.  

It has come to the government’s attention that most Kenyan youths have defaulted on Fuliza loans, especially after the virus broke out. Fuliza was introduced in January 2019 and is popular among low-income earners who take loans of less than Ksh 2,000 for their daily needs, with the debt settled after sales are made or wages received.

Kazi Mtaani Payment Hindered By Fuliza

The state recently introduced an economic stimulus programme, Kazi Mtaani, to help create employment for the youth. However, some of the young people employed on the programme cannot be paid through their mobile phones because their lines have been blocked for failure to settle Fuliza overdraft loans.

The payment hitch, disclosed in a report by the National Assembly Committee on Labour and Social Services, shows the youth’s addiction to mobile loans that are easy to access in small amounts but are priced higher compared to credit from banks and Saccos. Young people in Kenya are really hooked to the credit service.

So bad is the situation that some cannot be paid their dues from the Kazi Mtaani project because of outstanding loans with Fuliza. Since Fuliza loan is deducted automatically, most of them registered with different cell phone numbers to evade this.

“Some used IDs that belong to other family members. The challenge is that the details provided do not match their ID numbers, resulting in pay delay,” reads a report by the National Assembly Committee on Labour and Social Services.

In the Kazi Mtaani programme, the youth are hired for 11 days and are compensated at a rate of Sh455 per day. This is down 30% from the Sh650 daily wage rate when the short-term employment programme was launched on April 29.

Fuliza charges a facility fee of 1.083% or 395.2% annualised, underlining the high cost of using the short-term credit service regularly. Most banks and Sacco loans are priced from 12% to 14% per year but lock out people without steady income streams.