There has been an increase in the number of digital lending facilities over the past 5 years with the number growing exponentially with the turn of the New Year. The Mobile Loans business has undoubtedly turned out to be a cash cow for investors and a concern for borrowers. All an investor needs is to develop a mobile application, have it online on app stores and they are in business. On the flipside, a borrower only needs a registered mobile number, an identity card, and of course a mobile phone, most likely a smart phone to apply for these easy to access loans.
There exists over 45 digital lending facilities in Kenya today, which include but are not limited to Safaricom’s M-shwari, KCB Mpesa, Branch, Tala, Barclays Timiza, Saida, Haraka just to mention a few. Funny enough is that over 95% of these loans are provided by the banking sector. These loans have perceived “low” interest rates, thereby attracting thousands of applicants daily. But a critical look at them, proves otherwise.
Credit Info Kenya, in a recent Market Overview of Mobile Loans in Kenya report, shows that on average, each of the 16% of Kenyan borrowers has about four mobile loans over the past six months while about 70% of the borrowers had up to six mobile loans at any given time. This evidences a growing aggressive borrowing culture in the nation, most of the borrowers being students or the jobless. A borrower confirmed that the vice is addictive and gets one hooked easily.
In as much as the mobile loans could go a long way in helping during emergencies, financial experts warn that many borrowers misuse the services by using borrowed funds for lifestyle enhancements like purchasing household items, mobile phones among other luxuries that would always depreciate rather than appreciate in value. Equity bank MD, Dr. James Mwangi has been quoted pointing out that regulation of the digital mobile lenders popularly known as fintechs should be regulated just as the other commercial banks or risk running the credit market into a crisis.
As to whether digital mobile loans are good, bad or ugly, you already have the answer from the insights above. Be on the lookout of other tips, tricks and insights on eliteaccounting.co.ke and thanks us later.
