Safaricom introduced M-Pesa reversal to much fanfare a few years ago. And then came Fuliza, an overdraft service that allows users to transact more than the money they have in their account.
And then the unstoppable force met the immovable object. It is not possible to reverse a transaction if I send money to a user that has an unpaid overdraft balance.
According to Safaricom, the money has been “used” and is not there anymore. In actual sense, they’ve covered themselves by making the person who sent the money responsible for the loan.
The Numbers
Banks in Kenya had an average of 13% default rate over the past five years. The default rate for Fuliza in 2020–even with the Covid pandemic and the economic downturn–was 1.6%.
Banks must be salivating over this loan recovery model. No debt collectors, no auctioneers, no follow-ups. Only some unlucky and unplanned loan guarantors.