Mobile lending is the future of credit access if self-regulation is achieved

By Steve Biko Wafula / Published September 17, 2019 | 8:12 am

mobile money

As my father used to say: “There are two sure ways to lose a friend, one is to borrow, the other to lend.”

Money is an emotive issue and few of us understand how truly money works. It’s the catalyst that defines our character and the Achilles heel of mankind. Money is grown through investments, through creative legal means. It’s called currency because money must circulate to be of purpose and value to the current owner.

Failure to ensure the circulation of the money leads to the growth of poverty. Borrowing money is one way to access the cash to you or oneself for whatever reason the money has been borrowed.

Borrowing is an ancient grid point to the circulation of capital in any given economy. When it comes to personal finance, borrowing in a key ingredient to one’s growth and how one manages this, will define a lot about their financial health.

Borrowing is both positive and negative depending on the reasons as to why one would want to borrow because it creates a debt into your financial health system and this can only be remedied to normalcy if the reasons for borrowing the money are followed through and the money paid back. This is where the challenges arise and one’s character is put to the test of financial prudence which ultimately affects one’s overall character.

Applying for a loan requires a lot of research—not just on loan specifics, but research on you too. Understand how you react around money. Money that is yours. Money that is not yours. Loans make some of our biggest life decisions possible, so it’s crucial to be realistic about your goals, your financial situation, and your future.

I took it upon myself to indulge in the medium lifestyle of an average Nairobian as far as loans are concerned to be able to enable me to make an informed substantive opinion on matters loans.

Debts are nowadays like children begot with pleasure, but brought forth in pain. Debt is like any other trap, easy enough to get into, but hard enough to get out of. Before the birth of mobile lending, the traditional mode of borrowing was a painful ecosystem. Mobile lending was God sent as it has made access to credit easier and more convenient.

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 interest rates. This is where the crux of the matter is. Kenyans are crying out, saying they are being taken advantage of. I am forced to ask, this is not a moral issue, and it’s a legal transaction matter, where does morality come in? Its willing buyer, willing seller…where does the issue of being taken advantage of come from?

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. Not to mention, the other available option was to go to shylocks and this is akin to visiting the devil and asking for help. This is why mobile lending has blossomed so much because it’s taken up a need that established and well-regulated institutions have failed to heed. To some point I am asking, who is pushing the conversation behind the name-calling for mobile lending, is it the public or the regulated financial institutions?

The issue of collateral when it comes to loans has been the bane of the conversation and this is something that mobile lending has been able to sort and take advantage of the Credit Reference Bureau to analyze and study one’s credit history and see how best to lend. One key denominator across the majority of the mobile lending platforms has been the use of one’s M-Pesa transaction history. This means Safaricom PLC’s M-Pesa platform has been crucial and instrumental in enabling mobile lending growth.

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 three weeks.

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.

Lenders will use your credit information to determine if you’re worthy of borrowing and to determine what type of interest rate they will give you. You need to know your credit score. If you have a low credit rating, you will be facing higher interest rates on your loan which means as a borrower you will pay more interest in the long run.

Case Point for Self-Regulation for the Mobile Lending Sector; –

Mobile lending is a welcome move in a financial ecosystem that has made it very difficult for people to access credit. The ease at which loans can be gotten, the convenience at the behest of technology indeed does show the potential for the sector to outdo the traditional banking module. Yes, in every business environment where there are no rules, the customer is normally taken advantage off. However, despite the alleged success of the sector, it is still very nascent and it is yet to tap into its full potential.

I agree that a lot needs to be done. The public needs to be educated on the essence of loans, the importance of paying them back, the need for budgeting, the need to live within one’s means and most importantly, the public must be made aware of the problems they will get into in the event of default.

My grave concern with the public is they never read. They never research. They never bother to know what’s up. We live in an ignorance that isn’t innocent yet the hue cry that we make when something is off, you would think the world is coming to an end. I believe the mobile lending sector should be left to self-regulate for now as it develops its core character.

I believe all the players should share their notes, compare their mistakes and agree on a framework to self-regulate the industry for now under the watch of the Central Bank of Kenya. There is too much regulation in the country and its killing of key sectors. Look at manufacturing, at construction, at the entertainment sector, too much of something is poisonous and I am breaking this down in simple language for everyone to understand and appreciate the gravity of the matter. Our financial wellbeing begins with us. With you and me.

Kenyans are lazy to understand what Fuliza means; –

Public education is critical and this needs to be done by all the stakeholders. They need to pool resources together and educate the public. Especially the regulators in the financial sector. I say this because I have seen it said countless times that Fuliza is the most expensive mobile loan. I honestly want to shed tears, pick up a stone, shape it into the size of a spear and throw it at someone. Fuliza is NOT a mobile loan or product BUT an OVERDRAFT. These two are different, operate under different rules and a completely different ecosystem on rates and interest. Our ignorance indeed should be turned into an export product at this rate. Seeing business analyst talk about Fuliza like it’s a mobile loan, really breaks my heart because it means we do not understand what we are even talking about.

Reuben Clark Jr once said that it is a rule . . . in all the world that interest is to be paid on borrowed money. He said that Interest never sleeps nor sickens nor dies; it never goes to the hospital; it works on Sundays and holidays; it never takes a vacation; it never visits nor travels . . . it has no love, no sympathy; it is as hard and soulless as a granite cliff. Once in debt, interest is your companion every minute of the day and night; you cannot shun it or slip away from it; you cannot dismiss it; it yields neither to entreaties, demands nor orders; and whenever you get in its way or cross its course or fail to meet its demands, it crushes you. This is something every Kenyan needs to understand and appreciate the fact that they could qualify for a mobile loan, meaning, it is paramount for any borrower to pay back. Any civic education that will be carried out should focus on this at its core of the message.

The case for Safaricom’s Fintech Platforms and Others and why the Brand’s one is the Better Option

Affordable Rates

As compared to other Fintech platforms, Safaricom’s loans are the most affordable with the least penalties on loans.

For example, a mobile loan app Tala charges the following rates:

The fixed interest of 11 percent is charged on customers who repay their loans on weekly installments and 15 percent for those that repay in monthly installments.

Compare this with Safaricom’s M-Shwari interest rate of 7.5%.

Some mobile loan apps have been said to charge exorbitant interest rates with some charging as high as 21 percent in three weeks.

Reliability and Trust

Safaricom has over the years been rated the most trusted brand, most admired and most valuable in Kenya due to its M-Pesa.

This is in consequence of it being a reliable and trusted brand in Kenya as compared to other platforms

Disturbance Issue

There have always been complaints by users of mobile loan apps on the number of times they receive calls and texts from debt collectors, with threats accompanied by the calls.

On Safaricom, however, they only send you reminder text messages without having to call you and issuing threats.

There are 350 varieties of shark, not counting loan and pool. Never assume that all is well when it comes to your savings or loans. Get a printout to ensure you know exactly what is happening. Learn. Understand. Research.

Also Read:

About Steve Biko Wafula

Steve Biko is the CEO OF Soko Directory and the founder of Hidalgo Group of Companies. Steve is currently developing his career in law, finance, entrepreneurship and digital consultancy; and has been implementing consultancy assignments for client organizations comprising of trainings besides capacity building in entrepreneurial matters.He can be reached on: +254 20 510 1124 or Email:

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