Hard up? Go for loans from digital lenders in Kenya

Every Kenyan who chooses to be honest at this time will tell you that the cost of living has hit them the wrong way. If you doubt this, just check out the long queues of innocent yet broke Kenyans waiting for iris scanning for Worldcoin. The desperation has become so real that even salaried people can’t be sure to sail through the month without shortfalls. Its at this point that taking digital, easy-to access loans become a quick option.

Tough times literally calls for inniovative maneuvers and the many lenders giving mobile loans in Kenya have become a great rescue for many. Although the ease of access and minimal collateral security on such loans encourage uncessary borrowing, they really help a great deal. Something attractive about these mobile phone loans is that they rarely discirminate whether one has a salary or not; just a few checks and boom! the money hits your mpesa.

Cash strapped Kenyans find refuge in mobile loan apps

The real hustler Kenyan in some remote places like Rumuruti, Marakwet or Kaksingri struggle each day to make ends meet. Even with a salary, so many people still find it extremely hard to meet all the bills and other expenses that come in between the month.

Financial discipline and costs cutting may be best coping mechanism. But believe you me, there are centain needs you can’t do away with completely and its here that taking out a loan becomes necessary.

Different from the past where lenders served only those with a payslip or property as a collateral, digital lenders now strive for greater financial inclusion and offer credits without the need for hectic need for collateral security. 

M-Kopa, Mshwari, Fuliza, Zenka and the likes come across as household names today. These lenders make it easy for people to access credit from the comfort of their phone which makes life so comfortable. Lenders were considered God sent but over time took an unpopular tangent in debt recovery.

Some of the debt collectors attached to the lenders became irritating and highly insensitive. Borrowers were literally hunted down and shamed. The furore about how the debt collectors would go at length to shame borrowoers for non timely repayment made them repulsive. But for lack of better options, people would still go back.

The breach of privacy coupled by unsusual interests rates that these digital lenders charged bred dissent and its at this point that it caught attention of regulators. The Central Bank of Kenya swung into action to control these digital lenders. So far, only a few have been re-approved but the list keeps growing. 

A boom for digital lenders in Kenya up until 2022

Just before the central bank of Kenya stepped on the brakes for digital lenders, creating a need for re-approval, the industry recorded a great spike in operators. You could simply do a lazy check on the internet for a digital lender and find one. Make the next step and go to the Playstore to download the application. Make a few straightforward registration, provide identification documents and get your loan. 

With the high availability and accessibility to digital borrowing , so many Kenyans ended up asking for loans even if they never needed it. But what followed would be seasons of outright threats and intimidations by debt collectors. 

Because not so many Kenyans apply due diligence to get down to the nitty gritties about the digital loans, or any loans for that matter, they ended up falling for convenient borrowing. So, digital lenders fll into bad books and good ones with Kenyans depending on individual experiences. But whatever thoughts we may have, everyday struggles and shortfalls in our budgets leaves us with limited choices but to look out towards them, especially because they tend to be easily accessible. 

What makes Digital lending popular In Kenya? 

Lending and borrowing isn;t anything unique to Kenyans at all. Everywhere, people borrow but the current wave of borrowing from digital lenders in the country makes it a talking point. As opposed to other traditional forms of borrowing where one would make physical visits to the lenders premises and sign a handful of documents to prove creditworthiness including giving a collateral security, now it happens all over the mobile phone. 

The accessibility and convenience of accessing digital loans so much fit in with the current financial struggles that many Kenyans undergo resulting in a high culture of borrowing. With internet access and smartphone at hand, Kenyans get access to  up to over 15 mobile phone lenders.

With loans over mobile phones, Kenyans get to beat the trouble of queuing for long hours in banks or other financial institutions. They also avoid the need to sign so many pieces of paper before getting awarded the loan. It could never get better than this when it comes to convenience in credit access, especially for a country still struggling to actualize effective financial inclusion.  

Conditions and regulations for approval of digital Lenders in Kenya

Up until September 2022, Digital lenders in Kenya had their operations largely unregulated. The information given about the people getting the loans and how this data wasbeing used raised eyebrows. This fell short of expectations for operations of financial facilties.

The Digital Lenders Association of Kenya (DLAK) in collaboration with the stakeholders and policy makers  then outlined the professional and ethical standards for the Digital lending industry. Briefly, some of the guidelines outlined include the licensing of Digital Credit providers, governance, credit information, consumer protection, digital credit business among many others. Below I will highlight some of the regulations put in place that directly touch the consumers.

Credit information 

It demonstrates how the digital credit provider should conceal all the information regarding their customers whether positive or negative. The credit provider has the restriction to use credit information for any other reasons other than making decisions regarding the transactions of a customer.

Digital credit business 

A digital credit provider should not introduce any other digital credit service or product or even alter the features of the ones which already exist in the market without authorization. The credit provider should also state the terms and conditions or any other requirements explicitly subject to its credit policy.

Also during credit collection the credit provider should not practice misconducts such as using offensive language, use of threats or violence, making unauthorized calls or text messages  to the customer or people in the contact list or posting sensitive information online regarding the customers as a way of giving them shame. Moreover, the credit provider is only limited to recover the stated amount in case the loan is non- performing.

Consumer protection 

A digital credit provider should generate and deliver all receipts or any other proof of transaction carried out with a customer majorly produced electronically or any other medium which is acceptable.

The Digital credit provider should also keep a record of all the complaints and queries presented by the customers and how it has been resolved. The credit provider should also not publish false or misleading information online through advertisements thus creating confusion to the public.

Approved Digital Lenders 

After the Central Bank of Kenya scrapped most of the Digital Lending institutions in September 2022, they extended a three day period after which all Digital lenders which were operating illegally were to shut down entirely. Upon the expiration of the 3 days ultimatum, only 10 Digital lenders qualify to operate according to the regulations set. They include;

  • Getcash Capital Limited
  • Jijenge Credit Limited
  • CeresTech Limited
  • Kweli Smart Solutions Limited
  • Mwanzo Credit Limited 
  • Giando Africa Limited ( Flash Credit Africa)
  • MyWagepay Limited
  • Rewot Ciro Limited 
  • Sokohela Limited 
  • Sevi Innovation Limited

Later on, other institutions also obtained the proper license and were also approved to operate under the enforced regulation. They include;

  • M-Kopa Loan Kenya Limited
  • Mycredit Limited
  • Natal Tech Company Limited
  • Ngao Credit Limited
  • Pezesha Africa Limited
  • Tenakata Enterprises Limited
  • Umoja Fanisi Limited
  • Zanifu Limited
  • Tala
  • Jumo Kenya Limited
  • Letshego Kenya Ltd
  • MFS Technologies Limited

Challenges that comes with using digital lending platforms 

Technology comes with its setbacks. Those using Digital lending platforms face the risk of meeting hackers and scammers who usually use the information provided online like passwords.

Sometimes, the process of obtaining a loan also turns out to be very slow and futile with the lending institution verifying customer’s details within relatively long periods of time. Equally, it becomes challenging to the lending institutions when the borrower fails to pay on the specified time.

Fredrick Awino

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