Recent data released points out that mobile loans uptake is increasing steadfastly, with many subscribers having one or multiple loans. The increase can be attributed to the fact that they easy to set up and run, and high mobile penetration in the country for lenders. Subscribers on the other hand find the loans fast, convenient and relatively hassle free to get.
These mobile loans are usually short term i.e. monthly and have a high interest rate especially when compounded per year. This is more so considering that mobile customers repay a loan and immediately take up another one. Or pick from one lender to repay a due loan from another lender. Thus effectively the loan charge for mobile loans is yearly. Sadly reports are that the default rates are high and more than half a million have been blacklisted with CRBs.
Mobile lenders are right to charge rates that reflect the risks exposure and potential returns expected. But they are missing the big picture. The potential market for mobile loans and mobile banking is huge. In the formal employment sector, banks are discouraging brick and mortar engagement and urging their clients towards internet and mobile banking. Moreover, the bulk of workers in Kenya are in the informal sector. So mobile banking is sort of the next frontier.
To start with, lenders should not egg their mobile loans clients on to take risky loan amounts. Tamper aggressive marketing goals with responsible credit control. Though the client will suffer when blacklisted, the provider will also incur bad debts, and lose out on future profits from lending to the client had he not been blacklisted. Educate the clients on the dangers of defaulting since some of them are new to the formal banking experience and will think they ‘got’ away with it.
It takes less than five minutes to apply and get a loan on mobile. For the lenders, this is cheaper to run and manage, while convenient for the client. But that should not excuse the providers from providing excellent service. In fact, let lending loan be the bare minimum. Use that to know your customer and build a relationship. For instance, if you knew that the customer belongs to a Sacco or a Chama, or has a business that pays the county rates every week, one can invite or refer them to the bank for a bigger more long term financial partnership.
Staff can be retrained so that they now focus on the mobile customers and their needs. Right now, very few lenders give their mobile loans customers an avenue to voice their concerns eg ask for an extension of the credit period. Blend both the mobile digital data driven approach with the social human interaction wherever possible to set yourself apart. As it is customers change from lender a to lender b, in the blink of an eye and can’t really differentiate them.
Add value to the client and not just by disbursing loans. Partner with NHIF to pay for the clients the rates and recover back the money in the course of the month at no extra charge. This will help both the gov’t via NHIF to increase health coverage, and the lender since most informal business collapse when the owner gets sick and withdraws capital to pay medical bills. Have the loans insured and work out ways with the customers so that in case the client defaults, the insurance can repay the loan without being blacklisted.
Clients can default and even change their mobile lines. But they will try their best to survive the rough times and get back on their feet. As mobile lenders let’s not be the first to free and forsake them. Instead let’s nurture them as they will turn out to be geese that lays the golden egg.
Kariuki Gathuitu (firstname.lastname@example.org)