The convenience of getting a soft loan from mobile money lending apps without the hustle of going through family, friends and bank queues, has made life very easy for most people. Over time the number of mobile money lending application apps has grown tremendously with over 10 apps, at the convenience of a lenders smartphone. The likes of Tala, Branch, Okolea, just to mention but a few, have developed a strong base of regular clientele, most being small to medium entrepreneurs in dire need of funds to finance their startups.
Equity Bank CEO James Mwangi expressed his concerns regarding the growing number of mobile money lending applications apps following a 20% credit reduction in the private sector. He said mobile money lending applications have become popular after government’s move to cap interest rates, sending perceived risky borrowers out of the credit market and subjecting the safe borrowers to high-interest rates charged by the apps.
“If there is somebody who needs protection from high exposure rates, it’s not me and you as we can protect ourselves, its those at the bottom who have very limited choices,” said Mwangi.
The rates have weighed heavily on small businesses and individual borrowers who have resorted to exorbitant microlenders, who are reaping big.
“We really need to talk about this. Small and Medium Enterprises (SMEs) are really hurting and have been left to go to the shylocks which have become a serious issue of concern to all of us,” said Central Bank Governor Patrick Njoroge.
Early March 2018, a study conducted by non-state financial inclusion agency – FSD-Kenya and CBK indicated about 6.5 million Kenyans are digital borrowers with 31% taking the cash to try their luck in betting as expressed by Tuko.
Mwagi emphasized the need to set equal regulatory measures for both traditional money lenders and the mobile applications so that they can compete fairly.