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Mobile loan shocker for the jobless, students

Are you jobless? And are you a student aged 25 years and below?

If your answer to either of the questions is in the affirmative, you may not get a loan from digital apps going forward.

Digital lenders have put in place a raft of measures to protect their businesses ahead of scrutiny by Parliament even as they insist they are open to regulation by an independent authority.

Mr Kevin Mutiso, the spokesperson of the Digital Lenders Association of Kenya (DLAK), says soon they will not lend to the young people and the unemployed to reduce the risk of defaulters.

“We have started working with bodies like Kenya Revenue Authority, National Registration Bureau and Credit Reference Bureau to get valuable information about our clients. This will help us stop lending to students and those who don’t have the capacity to repay,” he told the Nation in an interview.

Mr Mutiso gave the example of Shika App, a digital lender he runs that is no longer lending to people who are aged 25 and below, the majority of college students.

The association’s 23 members have also put in place data exchange mechanism to assist them to stop multiple lending that increases defaulting chances.

“Under this initiative, if a person has borrowed, say Sh20,000 from Tala he or she will be barred from taking another loan from any other digital lender before the previous loan is repaid in full,” said Mr Mutiso, adding that “we want to instil discipline among our customers.

The association has launched a national campaign on financial literacy to help the public understand how they conduct their business.

Managing their financial lives

“Kenyans today have more choices than ever before, but they also face more risks when it comes to managing their financial lives. Money March is a moment to bring providers and customers together to discuss how we can best leverage digital,” explained DLAK Chairman Robert Masinde.

The campaign comes as Parliament readies to investigate illegal operations of some digital lenders.

On Wednesday, National Assembly Speaker Justin Muturi sanctioned investigation into digital money lending with a view to stopping unregulated money lending.

This follows a petition by Mathare MP Antony Oluoch who wants the Committee of Finance to probe their alleged “illegal and exploitative tendencies”.

The MP also wants the Central Bank of Kenya and the Communication Authority of Kenya to audit the operations of the lending platforms and regulate them.

“Digital borrowing has become a social menace responsible for suicides, divorce, family breakup and increased listing of loan defaulters by the Credit Reference Bureau (CRB),” Mr Oluoch says in the petition.

Platforms that will be investigated include Tala, Mshwari, Fuliza, KCB M-Pesa, Branch, Shika App, iPesa, Berry, Okash and Zenka.

Others are T Alternative Circle, Stawika Capital, Finance, MyCredit, Okolea, LPesa, Kopacent, Four Kings Investment T/A Sotiwa, Kuwazo Capital, Mobile Financial Solutions and Finance Plan Ltd.

Statistics from Kenya National Bureau of Statistics (KNBS) show there are currently more than 50 mobile and online credit providers in Kenya with more than 19 million Kenyans actively borrowing.

Mobile loan apps

The data show that 40 per cent of the borrowers have multiple (up to 10) mobile loan apps.

Mr Oluoch regretted that unregulated mobile loans have plunged some Kenyans to borrow more than can repay, ruining lives, with some borrowers taking their lives.

The mobile lending platforms, he said, have been charging an exploitative interest rate of 19.1 per cent instead of the 13 per cent recommended by the CBK.

Because they are not recognized as financial institutions and supervised by CBK under the Banking Act, they operate without of regulation, including tax obligations

“Due to lack of proper regulation, mobile money lenders infringe on clients’ right to privacy by accessing customers’ contacts to call friends and family about the borrowers’ debt status.”

But Mutiso said they are open to an independent regulator to streamline the sector that also provides credit to small and medium-sized enterprises (SMEs).

He said they are in talks with CBK and other stakeholders to shield consumers from exploitation and ensure professionalism in the sector.

“We are open to regulation. We will collaborate with CBK, parliament and all other relevant bodies to ensure proper laws and regulations are put in place to guide the sub-sector,” Mr Mutiso said.