overdaft

Damning statistics indicate that in Kenya, a majority of small businesses don’t get to celebrate their second birthdays. While a good number of those that do, are usually packing up by their fifth year.

But why does this always happen? Sometimes it is not because lack of business that an SME will shut down, rather, too much business may as well see it shut its doors for good.

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It could happen that a small business is too successful, growing by leaps and bounds, bringing with it more material costs or subcontracted costs potentially.

Nonetheless, whatever type of new cost that comes with success, it is imminent that a successful small enterprise will require a constant funding net throughout the year.

One of the things that mega businesses do to stay afloat is that they acquire an overdraft or a facility of some kind, while smaller enterprises shy off, and the term ‘overdraft’ to them is almost like a dirty word. 

But very rarely can a small business be able to grow and fund the growth organically. And when suddenly an anticipated sale doesn’t go through, it could mean a funeral for the business, and this where a quick bank overdraft would come in to offset the situation, while at the same time maintaining its health, thus preventing a looming collapse.

But considering that in Kenya, a majority of small businesses and their owners remain unbanked, with most of them relying on mobile banking services, there are provisions in place for this specific group of business owners. 

For instance, Fuliza, the mobile overdraft facility launched by Safaricom in partnership with CBA allows small business owners to offset short term financial requirements through their mobile phones.

The trick is that a small business owner does not require to have a bank account to use Fuliza.

If for example, a small business owner is in the middle of purchasing stock from an open market and they, unfortunately, run out of funds, Fuliza will offset the balance through Mpesa in no time, and voila! The transaction is complete, saving them time as opposed to applying for a loan which should ideally be reserved for long-term, higher-value purchases.

Since its launch six months ago, and because of its convenience, Fuliza has now been credited with democratizing overdraft even to the unbanked Kenyans who include a majority of small business owners e.g. mama mbogas

Fuliza Overdaft
A vegetable vendor in Nairobi’s Mukuru Kayaba Slum

But this ‘party’ is not just small business owners, individual Mpesa customers who from time to time need bridging as they wait for a windfall, have saved themselves a lot of time and embarrassment by leveraging the world’s first mobile overdraft facility, which unlike a mobile loan, will allow for multiple overdraft transactions depending on the customer’s limit.

They can then easily repay the overdraft on their next Mpesa recharge and can continue borrowing again at whatever time they please, talk about convenience.

An overdraft is an extremely important, ideal and simple way of keeping a Small business healthy, and that’s the thing that larger businesses understand and do, while smaller enterprises don’t.

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