By Grace Wachira

In recent time, lots of money lending apps have entered the local market. Tens of unregulated micro lenders have invested in the credit market in response to the growth of demand for quick loans.  These apps have become quite popular in Kenya with a recent survey from credit bureaus operating in the country revealing that over 19 million Kenyans (38%) are active mobile loan borrowers with 40 per cent of this number having loans from at least six out of ten fintechs.

There is no law or regulator in Kenya to manage mobile loan apps. It will be interesting to see how the Central Bank of Kenya (CBK) pushes for regulation in this space and whether the proposed law would touch on other mobile financial service offerings such as crypto. The youth (aged 18-35 years) are the main online borrowers. I met a few young people who have previously borrowed from one of the lending apps in order to know what leads to that, what they do with the loans, how the interest rates are arrived at as well as the pros and cons of borrowing using the apps. They all agreed on one thing – those mobile loans are easy to access since there is no collateral needed when borrowing. Secondly, the duration of payment is  too short and one can  borrow from multiple apps at the same time.  Fatuma Abdi, one  of the students  I interviewed  said  that the  interest rates  charged  by fintechs  are  exorbitant  ( as high as 500 percent per annum)  and the loans  attract  other  charges if they are not  paid  on  time . Another disadvantage of these   apps is that they obtain your personal details (for instance your phone contacts) who are called if your payment is late hence subjecting you to a lot of humiliation. Clearly, that is unethical.

 To some extent, I would   blame the   borrowers who   don’t take their time to read through the rules and regulations and the terms and conditions before applying for mobile loans. It is very   embarrassing when people (especially your close friends and relatives) learn that you   have a loan that you can’t pay.

These instant loans have become the saving grace for most households who rely on them to supplement stagnated revenues making it a bit hard to avoid them altogether in this era of digitization. Nevertheless, they need to be regulated because of their predatory tendencies. It is therefore good news for these desperate borrowers because the Competition Authority of Kenya (CAK) has started investigating both regulated and unregulated online lenders. Hopefully,  their  insatiable quest for profits shall finally arrested.



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