Co-operative Bank of Kenya customers tapped Sh2.4 billion worth of digital overdrafts in the seven months to July, reflecting the rising demand for short-term credit to bridge cash shortfalls when paying bills and making purchases.
The lender says the digital lending product, Kamilisha, formally launched in November last year, recorded average monthly disbursements of nearly Sh400 million during the period as more customers used the facility to meet immediate financial needs.
The product allows individuals and businesses to complete transactions when funds are insufficient at a time of paying bills such as house rent, electricity, stock purchases or sending money.
Co-op introduced the overdraft product as part of its push into the growing digital short-term credit market, putting it alongside products offered by rivals including Equity Bank and Safaricom.
Safaricom’s Fuliza and Equity Group’s Boostika also let customers complete transactions even when the money available in their account is insufficient to meet payments.
“The product’s popularity is driven by its ability to help customers meet short-term financial obligations, address emergencies, and complete transactions when account balances are insufficient. Customers also benefit from a seamless digital experience, with loan limits, borrowing and repayments all digitised,” Co-op Bank said in response to our queries.
The Sh2.4 billion disbursed between January and July this year brings cumulative Kamilisha lending since its launch to Sh3.3 billion, highlighting the rising uptake of the product less than a year after entering the market.
The lender said the overdraft’s personalised borrowing limits are generated through its digital scoring capabilities, with customer information and transaction behaviour helping to determine access to credit.
“Co-op Bank’s robust AI-powered credit scoring engine uses customer transaction history and income patterns to allocate borrowing limits, enabling customers to access credit quickly without paperwork,” said the lender.
The overdraft is part of Co-op’s digital credit offering, which also includes E-Flexi that offers salary advances to customers with salary accounts at the bank. E-Flexi remains Co-op’s larger digital product by volume, disbursing Sh41 billion in the seven months to July.
The bank sees room for further growth of the overdraft product as awareness increases and more already-approved customers begin using the facility.
The two digital credit products have lower default rates when compared to conventional credit, with an average of nine out of every 10 loans disbursed being repaid monthly, according to the bank.
Co-op Bank attributed the repayment performance to customer knowledge, AI-powered know-your-customer processes, and analytics that monitor transaction behaviour and credit performance.
Banks continue to deepen their digital lending offerings to capture demand for small, quick loans that can help customers manage short-term liquidity needs without going through traditional borrowing processes.
KCB partners with Safaricom for KCB-M-Pesa and fuliza loans. NCBA Group, which offers digital loans called M-Shwari, also partners with Safaricom for the Fuliza product.
