When digital lending was first introduced in Kenya in November 2012 through M-shwari, a collaboration between Commercial Bank of Africa (CBA) and Safaricom, its main aim was to be used for saving and borrowing so as to cope with unexpected needs.
Years down the line, however, with the introduction of several other lending platforms into the market, the once dubbed people’s savior has turned into a menace, threatening to kill a generation it also needs to sustain.
Most people opt for digital lending because the platforms are easily accessible, no prerequisites needed and quick access to the funds
For starters, most of these platforms’ interests are way higher than the commercial banks’. For instance, M-shwari charges a monthly interest rate of 7.5%, which translates to 90% per annum. Branch charges 14% per month, translating to 168% p.a.
Bank interest rates are approximately 13% p.a.
Sometimes, a breach of customers’ privacy occurs when the lending applications, in a bid to determine an individual’s spending patterns, collect personal data without one’s consent.
Close to 2.7 million Kenyans have been listed by various Credit Reference Bureaus (CRBs), for defaulting on loans as little as Kshs 200.
The Central Bank of Kenya does not regulate mobile lenders, which makes it difficult to draw the line between what is wrong and what is not.
In the long run, mobile lenders need to be regulated to protect consumers from being entangled in debt.
