Kenya is a borrowing nation. From the national government accumulating debts from China and now World Bank to the common man on the streets wobbling with debts from shylocks and other lenders.
Kenya is said to have at least 500 mobile lenders who issue loans to Kenyans via mobile loan apps. The lenders have for many years been enjoying an unregulated atmosphere leaving them to set their own interest rates.
Millions of Kenyans opted for mobile loan apps after most financial institutions kept off from lending to individuals and SMEs as they were considered risky borrowers.
Mobile loan apps, on the other hand, lends to their consumers without security or filling of any paperwork at an interest determined by the lender within a certain period, mostly one month.
The lenders, however, have been accused of taking advantage of their consumers by charging them exorbitant interest rates with some charging as high as 21 percent in a period of three weeks.
The majority of banks in Kenya have also moved to tap into the mobile lending grace but now various stakeholders are calling for the regulation of the sector.
Stats show that more than 500,000 Kenyans are listed on the CRB, 80 percent of them being the youth who either delayed or failed to pay back their mobile loans.
The highest interest rate charged by a mobile loan app in Kenya is 35 percent with the loan taken payable within 30 days. This means that if one takes a loan of 1,000 shillings, after 30 days, he or she will have to pay back 1,350 shillings.
On Tuesday, Kenyan senators called for the regulation of mobile lenders in Kenya saying they were saddling borrowers with high-interest rates that are above the cap provided in the law.
The senators used Fuliza as an example, saying that within the first 3 months of its launch, it had raked in 29 billion shillings which later rose to 45 billion shillings within 6 months.
The Central Bank of Kenya Governor Patrick Njoroge, on his part, said that the mobile lenders in Kenya have become predatory and were operating like Shylocks.
At the same time, the CBK is set to revise the regulations governing the Credit Reference Bureau (CRB) to address concerns raised by Kenyans especially when they default.
“We realized that sometimes the system takes longer to refresh, and they are very quick to respond when you default but they are not so quick to respond when you make your payment,” said the governor.