Fuliza is a new service by Safaricom that has been around for about a month. The service, an overdraft facility has so far lent over 6.2 billion shillings since its launch. This is a great narrative for Safaricom but a worrying factor for Kenyans. It is clear that Kenyans are treating Fuliza as a loan product such as M-Shwari and here lies the problem.

A quick perusal through social media paints a picture of Kenyans frustrated by Fuliza because they treated it as a loan product instead of an overdraft facility that should be used cautiously. Unlike a loan, an overdraft facility allows you to overdraw your account balance below zero, and then repay the negative balance automatically as soon as you have funds in your account.

A loan, on the other hand, is money lent to you and payable within a specified period. For loans, your account balance does not have to be zero and this is what the likes of M-Shwari, KCB M-Pesa, Tala and Branch are.

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Once you opt-in to Fuliza (*234#), Safaricom will let your M-PESA balance go beyond zero while you are making certain payments; Lipa na M-PESA and Send Money. The amount borrowed will then be deducted from your M-PESA account as soon as you receive any funds until your balance is back to zero.

Fuliza does have a limit depending on your M-PESA usage. This means that your negative M-PESA balance can only go to the level of your limit. Once you utilize your Fuliza facility, it is repayable within thirty days and a 1% ‘access fee’ is applied to the amount borrowed on top of a daily ‘maintenance fee’ on the outstanding Fuliza balance. Here’s a breakdown of the daily maintenance fee:

This means that if you get an overdraft of, say, Kes.6,000, you will be charged 30 bob every day you have the negative balance. If you repay part of the debt, let’s say you pay Kes.4,500 on the fifth day and the balance remains as Kes.1,500, which you repay on the seventh day, you will be charged 30 bob for the first five days and then 20 bob for the other two days that you took to clear the loan.

Now that we have the understanding, here’s how to correctly use Fuliza

Safaricom actually recommends that subscribers only use Fuliza when there is an urgent need for cash and after careful consideration and realization that the fees incurred for using Fuliza are better than the missed opportunity of not having cash.

Such instances might include; paying an emergency medical bill, rent, paying clients or paying for shopping at the supermarket line when the bill is higher than expected.

Kenyans should refrain from taking a Fuliza overdraft to repay other outstanding loans or for entertainment purposes. This realization will save many the agony of calling out Fuliza as a “reap-off”.