The Central Bank of Kenya (CBK) is conducting a study on the impact of its policies and regulations on lending through mobile phones and the Internet.
Though accurate data is not available, the number of mobile money lenders has grown significantly in recent years to the extent the CBK is concerned that the space may be expanding faster than the CBK can regulate more effectively.
The players are coming up with new and varied products for the market.
The mostly unregulated business of predatory lending is booming with increasing advertisements on billboards, on radio and social media offering instant loans.
point is that it is actually evolving and not so cut and dry,” Dr Njoroge said.
The platform has, however, grown in popularity because of offering instant credit, employing technology and building a credit history for their customers to identify good borrowers.
Some of these lenders, however, fail to indicate interest rates — only giving a figure to be paid monthly or weekly, but if calculated the repayment stands at astronomical figures.
Others claim their interest rates are near-zero, which conceals the fact that they are calculated monthly and, if calculated per annum, they are significantly higher than what a bank charges.
Early this month, mobile lending application Mkopo Rahisi which said it was rebranding into a financial service platform christened Tala said it has dispensed Sh700 million to more than 70,000 customers in the past 11 months.
Tala vice president East Africa Amanda Donahue admitted that most of their clients came back for new loans to offset the old ones creating a cycle of dependency on the pay-day loans.
“Repayment rates are more than 95 per cent and more than 90 per cent of the customer’s return for a second loan,” she said.
The CBK has noted the risk that the mobile lending space could grow even bigger if the formal banking system which is closely scrutinised by the regulator is slapped with a new law capping rates.
Credit: Business Daily