Data from the Transunion Credit Reference Bureau has put the mobile lending sector on the spotlight after revealing that 500,000 people are at the present blacklisted with Credit Reference Bureaus (CRBs) compared to 150,000 three years ago.
The increasing number of defaulters has arisen because of the over 50 mobile lending apps accessible to Kenyans. People that are blacklisted borrow from mobile and online lending platforms such as M-Shwari, Tala, and KCB M-Pesa.
This comes less than a week after Central Bank of Kenya Governor called for the regularisation of the fintech lenders saying they are taking advantage of the population.
“In a sense what has happened is there is an opportunity for some predators and they are preying on our population.” Dr Njoroge said at a digital financial services industry conference in Nairobi.
Lack of Knowledge on the Repercussions of Defaulting
According to Transunion chief executive Billy Owino, most people are being blacklisted because they are unaware that defaulting on a loan of as little as Sh500 can get one blacklisted.
“Most of the borrowers do not know how they got blacklisted. We get like 200 calls daily from individuals in this category asking how they ended up in the blacklist,” he said adding that lending platforms also fail to completely use information from CRBs before giving out loans.
In addition, Mr Owino said lenders do not take time to investigate the loans their borrowers have on other platforms.
“There are over 50 mobile and online lending platforms in Kenya today. Take an example where an individual borrows from Tala, M-Shwari and other 10 platforms in a single day. To get a loan from one platform takes like three minutes,” he said.
“So they end up getting all the money at once from the 10 platforms. If these platforms checked the borrowing habits of that lender in the data provided by CRBs, they would have ignored him when they noticed that he approached many of them.”
Basically, a borrower is given 30 days to repay a loan. If the loan is not repaid by the end of that period, the lender submits the borrower’s details to the CRB for blacklisting. That means that the borrower cannot access further credit until they have repaid the unpaid loan.
However, even after paying back the loan, the debtor remains on CRBs list with a low credit score for seven years. Within that the duration, banks cannot offer the debtor any loan.