Are Kenyans Bad Borrowers? Putting Numbers into Perspective

l learned that almost 400,000 borrowers in Kenya have been listed by credit reference bureaus for defaulting on loans of less than 200 shillings.

Considering the average loan size of credit offered by Mshwari and other application is 3,300 shillings, this number of defaulters could be massive, probably running into millions.

The fact that these loans are even being marketed at our institutions of higher learning, introducing credit to our young minds means that many beneficiaries are either listed or on the verge of listing.

But that is not the gist of this tale. My last 10 years in microfinance space gives me an idea of who a common Kenyan borrower is, and their behaviors. Some are good, others are worrying. Kenya as a country espouses the common tenets of her citizenry. In my opinion, Kenya is a bad borrower.

A bad borrower will ask for an advance of Kshs 5 million for working capital to expand their business. Upon access, they assign a significant amount to a holiday in Bali, Indonesia. That is called diversion.

Anyone who has read Auditor General Mr. Edward Ouko’s report on the 5 billion shilling scandal at Afya House will tell you of diversion of funds against the law, the biggest casualty being free maternity being deprived of its rightful resources.

Grants or loans borrowed under certain value or purpose have continuously been allocated to other uses. Obviously, by the end of the day, we will not avoid cases of delayed projects or possibly non-delivery on flagship programmes and promises.

A majority of Kenyans have multiple loans, from conventional to digital loans. Multi-borrowing remains a key pointer to default and the ever-increasing non-performing loans in financial institutions in Kenya. An on-going conversation is how individuals are borrowing from one platform to repay another depending on what loan matures first. This leads to an endless circle and valueless access to credit.

Like a mother from whose pigment one is carved, Kenya has reached her preposterous level of debt. We are a community that is collapsing on the weight of liability occasioned by numerous sources, who are always ready to advance.

One of the key tenets I learned in my earlier banking years was to abstain from the infirmity of being compromised at the appraisal process of a loan. Conflicting interests form Kenya’s sources of credit, compromised tendering process aligned with the funders and continuous negotiations about kickbacks are a sign of a generation that has lost its fiduciary duty. The words of Mildred Cheredi, the lady who taught me banking are still clear in my mind:

“Don’t compromise your decisions in the credit appraisal process. If you do, you lose your moral authority. You might not recover”

The fact that the DCI is looking at files of eminent persons who were compromised by suppliers particularly for the dam projects, is a sign that Kenya is that bad borrower who asks for loans for development but a large chunk ends up smoothening pockets of a few individuals.

Think about collateral for loans. We have heard about Sri Lanka struggling to pay its debt to Chinese firms, then handing over a port to China. The same chronicle is happening in Africa where there are reports of the impending takeover of Zambia’s national power company by China over defaulted loan repayment. Some reports emerged last year that Kenya might have pledged the port of Mombasa as collateral for construction of Standard Gauge Railway.

These and other practices espouse what my experience has taught me about bad borrowing. As a country, I think the reality is, we are a bad borrower.