Mobile loans have become popular in Kenya because they are easily accessible compared to bank loans. 12 firms which form the Digital Lenders Association of Kenya have now agreed to only lend first time borrowers a maximum of KES 4,000. That means if you have never borrowed from any of the lenders, then you cannot be given an amount more than that.
The Digital Lenders Association is a new group that so far brings together the following mobile loans apps: Tala, Alternative Circle, Stawika Capital, Okolea, Lpesa, Kopacent, Four Kings Investment, Kuwazo Capital, Finance Plan, Zenka Finance, and MyCredit.
The firms through their chairman Robert Masinde said that they have to avoid plunging their customers into situations of excessive debts. The ability for a member to repay their debt is important because higher loan limits have caused customers much pain.
“It is not unusual to find rogue players emerging in such an infant industry. We are concerned with malpractices that have emerged. We can’t just wait for somebody to regulate us. We have to take the first step,” Mr Masinde said on Thursday June 27.
The firms also agreed to protect customer data as well as fully disclose the price of their loans. They will also share customer data so that customers who want to borrow from different apps will be well assessed before being granted any loan.
Quantitative research firm Consumer Insight Africa found out in a new survey that mobile loans was now the top source of finance for Kenyans. In the study released Thursday, it was found that borrowers now preferred mobile loans to borrowing from friends and family which have been the main options for many years.
Convenience and speed were among reasons given by those surveyed. 3,703 persons in 16 counties were engaged in face to face interviews for the research conducted between January and March.
Banks have also entered the digital lending playground with their own apps apart from supporting other third-party apps. This makes it possible for them to have a pie of the low value unsecured loans which has tens of players in a less regulated industry. Visa has also linked up with Branch loan app to offer loans.
The growing demand for the instant low-value unsecured mobile loans has increasingly seen firms venture into the mobile micro-lending segment, which is largely not regulated. This year alone has seen Kenyans borrow KES 1.79 trillion, a sharp rise from the KES 1.60 trillion they borrowed the whole of last year. The latest entrant was Stawi loans app which was launched by Central Bank Governor Patrick Njoroge.