How To Use Fuliza M-Pesa To Your Advantage
In an ideal world, we would not need to borrow money, and it would be quite easy to live debt-free. I see this from personal finance bloggers in the developed countries that I follow. They do not make much money but because they live in relatively predictable societies where, your healthcare is funded (or at least the cost of funding it is fairly predictable), kids education is funded to a certain level, and their day to day life is predictable, they are able to calibrate their lifestyles to fit their income level.
This is not the case for us on this continent. You may have a budget set for the month, then out of nowhere there is an emergency in the family. Or you fall sick. Or your paycheque delays. Or the government announces that they will start deducting 1.5% of your pay towards a Housing Fund you know nothing about. Finally, takes too long to build a decent investment portfolio, because of these things I just listed. Such is our life!
This makes borrowing money more or less a necessity for us. Debt is not good or bad, how you use it is what matters. The question then becomes, how do we use debt to our benefit?
This post is specifically about Fuliza M-Pesa because from the comments on my social media, many people do not understand how it works and are therefore not using it wisely and to their disadvantage. Fuliza M-Pesa is an overdraft service from Safaricom, which differs from conventional loans or even M-Shwari loans:
- It is not a cash deposit in your account that you can withdraw as you please. An overdraft allows you to complete a transaction you are undertaking.
- Unlike M-Shwari for example which you borrow and repay as you wish, an overdraft takes your M-Pesa account into the negative, meaning that as soon as you get a deposit, Safaricom recovers the amount plus the interest.
- Because overdrafts do not require security and you get money on demand, they are typically more expensive than conventional loans.
- However, the more judiciously you use the facility, the higher your credit limit goes, allowing you to borrow more and more.
So what is Fuliza M-Pesa suitable for?
The first group that should find Fuliza useful are business people. Getting business credit is not easy in Kenya, especially if you have a small business. At the same time, payments always delay and bills must be paid. Fuliza M-Pesa is an easy way to get that bridging cash inflow when you need it. If you are running a small business, then it is worthwhile to build your Fuliza credit up so you can utilize it to save your business when you need to and to take advantage of quick deals.
When it comes to personal use, we start with two questions:
- Are you borrowing to meet a need or a want?
- If it is a need, is it one-off, or regular?
The plain truth is that you do not need to borrow to finance your wants. Wants are temporal, if you give yourself time, the desire for it will pass. You do not need to Fuliza to pay your bar tab. With needs, it is more nuanced. You may need to borrow because your paycheque has delayed, someone is sick, or you need to buy food for the week. The most important thing is to use the facility wisely:
- If you’re using Fuliza to pay for day to day expenses, it’s possible you are buying things you did not buy before that you are now buying just because the credit is available. Track your expenses and cut down where there is unnecessary spending.
- If Fuliza is substituting other forms of more expensive credit that you use, then that’s ok, but work on a medium-term plan to get out of the debt cycle. This video will help you to wean yourself off debt. https://www.youtube.com/watch?v=JbvCmCZeroc
- If you are using it to fund emergencies, consider putting in place an emergency fund so that you do not get sucked into the borrowing cycle.
- Finally, if you borrow please repay. It is smart to have good credit when you need it, and you do not want to risk a CRB listing as it blocks off all other potential sources of credit.
Our aspiration is to be smart credit users!
