Safaricom Plc's overdraft facility, Fuliza recorded a 40 per cent drop in earnings as borrowers turned to the more affordable state-backed Hustler Fund.
The telco's results for the first six months of the year to September 30 released Thursday shows Fuliza's contribution to Safaricom's bottom line in the review period dropped to Sh2 billion from Sh3.4 billion the previous year.
The drop is attributed to a reduction on loan size by Sh60, with the average loan per person dropping to Sh260 from Sh320.90 in the same period last year.
The telco has attributed the slowdown in Fuliza borrowing to the government's Hustler Fund.
Introduced late last year, the fund has disbursed up to Sh30 billion at a competitive annual rate of eight per cent, calculated daily at a rate of 0.02 per cent.
Government data shows borrowers took an extra Sh11 billion in the first six months of the year, highlighting the thirst for cheap credit, which prompted the State to launch a third phase of the facility now targeting chamas.
"The 18.7 percent drop in average ticket size illustrates the shrinking borrowing power by customers in the face of the current global financial strain,'' the telco's CEO Peter Ndegwa said.
Fuliza on the other hand has been charging a daily fee of Sh6 from Sh10 in October last year for credit worth Sh500 to Sh1,000.
Further, those borrowing loans of between Sh101-499 pay a Sh3 daily while those who seek to draw Sh2500-70,000 are paying an average of Sh25.
“The fact that Hustler Fund has been successful shows there is still a very big opportunity and the need has still not been satisfied for affordable credit,'' Ndegwa said.
This saw the total revenue contributed by the product to the telco's balance sheet drop by 40.3 per cent in the six months under review to Sh2 billion compared to Sh3.4 billion in the corresponding half last year.
"Even though the revenue has declined, the actual disbursement has grown and it was intended to be that way that we want to make it more affordable and we want to expand the base,'' he said.
The telco in October last year reduced the daily charges on overdraft loans, with the fee on borrowings of between Sh1,000 and Sh1,500 dropping to Sh18 from Sh20.
A zero-free period of three days was introduced on amounts ranging from Sh101 to Sh1,000. Those borrowing Sh500 beyond the three days now pay a fee of Sh2.5, which was halved, from the previous Sh5.
Lower Fuliza charges, nevertheless, led to higher disbursements with the value of loans issued from the facility rising by 32.8 per cent to Sh419.2 billion from Sh315.6 billion in the same period last year.
Despite the financial strain, borrowers improved on loan repayment in the review period, with the value of repayment hitting Sh400.8 billion compared to Sh304.6 billion.
The number of borrowers also grew by 1.4 per cent to hit 7.5 million people compared to 7.4 million similar period last year.
While the amount borrowed via Fuliza dropped, the telco's other credit products like M-Shwari and KCB M-Pesa increased.
For instance, the average loan size on KCB M-Pesa rose to Sh5,484 up from Sh5,033 while that of M-Swari grew to Sh9,688 from Sh7,260.
Overall, Safaricom PLC recorded strong growth in profitability for the six months to September 30, 2023, with the Kenyan business hitting a double-digit growth in net income to close at 10.9 per cent to Sh41.6 billion.
Overall, the group net recorded strong growth in profitability for the six months to September 30, 2023, with the Kenyan business hitting a double-digit growth in Net income to close at 10.9 per cent to Sh41.6 billion.
Even so, the overall group net income, excluding minority interest, recorded a positive net income growth at 2.1 per cent to Sh34.2 billion, up from a 10.6 per cent decline in FY23, while the group service revenue grew by 10 per cent.
The strong performance comes on the backdrop of a price reduction in Kenya business allowing customers to do more for less.
Since 2020, Safaricom has progressively reduced up to 65 per cent in data prices, 44 per cent in outgoing calls per minute and up to 61per cent reduction in the M-Pesa tariff.
Ethiopia operations hit all major milestones, boosted by an accelerated commercial momentum including the M-Pesa rollout, which has seen the company register over 1.2 million customers on the platform in less than two months.
“This confirms what we have been saying about Ethiopia in terms of how it will significantly support our growth into the future. We are looking to maintain this momentum in the second half of the year,” he said.
With only 35 per cent of Ethiopians being financially included, Safaricom’s strategic vision is to deepen financial inclusion and promote a cash-lite economy in Ethiopia.