Five months ago, Google issued a global ban on Android apps that offer short-term loans, saying it wanted to protect consumers from what it called “deceptive and exploitative” terms.
But five months later, these ringing banks that offer cash for one or two weeks, are still commonplace in many countries on Google Play, the company’s marketplace for Android apps. Some charge interest rates that can exceed 200% annualized.
Lending apps are particularly popular in developing nations such as Nigeria, India and Kenya, where millions of people don’t have bank accounts or credit cards but do have mobile phones.
The epicentre is Kenya, where an explosion in mobile lending and little government oversight has effectively made Google the arbiter of which apps customers can choose.
Data from Central Bank of Kenya (CBK) indicates that in the last decade, Kenya has witnessed an unprecedented upsurge of technology-driven innovations in its financial landscape.
Apart from M-pesa platform, there are five other mobile money transfer and mobile money commerce operators providing these services. These include; Airtel (Airtel Money), Telkom (T-Kash), Finserve Africa Ltd (Equitel) and Mobile Pay Ltd (Tangaza).
CBK latest figures indicate that there are now over 223,931 agents, over 49 million customers and 787.8 million transactions valued at KSh2.1 trillion as at December 2018.
The mobile penetration rate has grown from 30.5% in 2007 to 106.2% in 2018.
The penetration level is more than 100% owing to the multiple Subscriber Identity Module (SIM) cards ownership across the country.
Mobile money subscriptions have also grown tremendously from 1.35 million to 31.62 million. The value of transactions has been growing over the years with an increase of 10% from KSh.332.622 billion in 2017 to KSh367.77 billion in 2018.
Despite the ban on loans that have to be repaid in fewer than 61 days, many apps available through the Google Play store are offering shorter terms to Kenyans.
Some lenders appear to be ignoring the rule, hoping Google doesn’t notice. But there’s also confusion about whether the policy really prohibits short-term lending.
The CBK Governor, Dr. Patrick Njoroge, has been one of those concerned about the rate at which Kenyans are snapping mobile loans from apps.
Dr Njoroge has previously described some of these mobile apps as predatory, likening them to shylocks over the high-interest rates they charge.
“The issue has been there for a while, they prey on individuals and you can’t blame people for taking the loans, maybe out of desperation,” stated Dr. Njoroge.
CBK has been pushing to be allowed to regulate these mobile lenders. At present, the law is silent on who between the CBK and Communication Authority of Kenya has the oversight role over these ringing banks.
“There has to be a law in place to regulate these apps, but how or who regulates them is anyone’s guess,” said Dr Njoroge.
Available figures indicate that there are over 49 mobile loans apps in Kenya, some with dubious terms and conditions.
A large majority of consumers who use mobile loans have been found not bothered with the usually lengthy and densely-worded set of conditions and terms.
Of the 10 most popular free Google Play apps in Kenya on Jan. 15, five were lending apps, according to a SimilarWeb ranking. All five claimed to offer loans of at least 61 days, and all of them fielded complaints from users about being offered much shorter terms.
