Loan apps in Kenya have taken over the country’s lending sector that banks have been left with no choice but to join or perish. As technology continues to dictate how people do business, always put in mind that the consumer is the centre of focus. The customer is at a disadvantage though because they have to try out different products with varying results before settling on any one of them or none.
Most of these loan apps depend almost entirely on your MPESA transaction history to measure your creditworthiness and set limits. For instance, M-Shwari has to ascertain that you have been an active MPESA user for at least six months before approving your loan. Some apps like Housing Finance’s Whizz App are now even on WhatsApp.
Some of the apps like Branch require you to link your authentic Facebook account during account opening. Apps can also request to access your phone contact list. These are actually their collateral. Should you fail to repay a loan, your friends, family and contacts may be pestered to remind you to repay the loan. That could be embarrassing to you and annoying to them, right?
Loan apps are among the most used for both employed and unemployed people in Kenya. And they are so many numbering over 60 in Kenya alone. More and more Kenyans are taking up loans some of which they are unable to repay, and end up being listed as credit unworthy by CRBs. Such sanctioning by CRBs can affect one’s credit worthiness for even five years. The loans are easily available and most do not need security. They are disbursed within minutes. We have a sneak preview of some of the most prominent loan apps:
Okoa Stima app
Okoa Stima app enables one to buy electricity tokens on credit. It is ranked as the most expensive digital lending app by the Kenya Bankers Association. The app attracts an interest rate of 43.4 percent pm. That is definitely atrocious. If you calculate that for a year, it is 521 percent.
You can borrow between KES 100 – KES 2000 to settle your electricity bills, and are expected to repay within seven days with 10 percent interest of borrowed amount. If you fail to pay within stipulated time, then a penalty of 10 percent of original amount is imposed.
Okoa Stima is a Safaricom product vended by Lexco One Limited which buys power tokens from Kenya Power.
Pesa na Pesa loan app
This app is also as expensive as the Okoa Stima loan app. It charges the same interest rate at 43.4 percent. It is available via USSD also at *415*33# and disburses emergency loans of between of up to KES 5,000 repayable within seven days. The loan is charged at 10 percent for every week you keep their money.
Kopa Chapa loan app
It charges interest of 38.8 percent pm. It is a product of Faulu Bank Kenya. It mainly serves Airtel Money customers and gives weekly emergency loans at 9 percent of total amount borrowed. You can borrow between KES 500 and KES 10,000. Late repayment attracts a 9 percent penalty of the original amount borrowed.
Pesa Pata loan app
It charges an interest rate of 30.4 percent pm. It is an interesting platform open for both investors and borrowers. An investor directly approves a borrower’s loan. There are various levels of partnership in the financial dealings, the more prestigious your level the higher the amount of instant loans you are able to access. One can borrow up to KES 20,000 short term loans, ie weekly loans.
Kopa Cash loan app
It charges an interest rate of 15.3 percent pm. It is available to both MPESA and Airtel Money customers and charges penalties for late repayment. The app is downloadable on Google Play Store.
KCB Mpesa loan app
It used to charge an interest rate of 4.08 percent pm but was reviewed August 2019 to 7.05 percent pm. Something you should know is that when you have money in KCB Mpesa account, it cannot earn any interest – until you lock the account to a Savings account. Also if you have to close your account, you wont do it from the comfort of your living room the way you did when opening. You must visit a Safaricom Retail Shop for account closure, the same case for M-Shwari.
Maximum amount you can save on KCB Mpesa fixed saving is KES 250,000, earning interest at 6.3 percent pm. You can borrow as low as KES 50 and maximum of KES 1,000,000. The borrower chooses the timeline within which they want to repay.
Zidisha loan app
Zidisha requires one to have an active business. The platform then connects creditors and borrowers at local and international level. You will need a recommendation and an active Facebook account to get Zidisha loans, which you can only apply for on their website. The amount depends on your credibility on the platform and creditworthiness.
Gives interest for any type of deposits, which grows depending on amount of time your money stays in there. Charges a facilitation fee of 7.5 percent pm of total amount borrowed. Minimum loan amount is KES 100 while maximum loan amount is KES 20,000. The repayment duration is 30 days.
Timiza loan app
Timiza loan app is run by Barclays Bank of Kenya, a member of ABSA Group Ltd. Available via USSD by dialing *848# on Safaricom and also on Google Play Store, the app charges an interest of 6.17 percent pm for any amount. All instant loans are payable within 30 days. After opening your account, it is supposed to be active lest the bank declares it dormant if not used in 12 months and possibly close it.
Timiza account holders can get loans at minimum of KES 50 and a maximum of KES 1,000,000 disbursed at the discretion of the bank.
Stawi loan app
A product of several banks, the Central Bank of Kenya is a stakeholder. We have written a detailed review of the Stawi loan app here.
Flat rate of 12.7 percent pm (equal to 153 percent pa) percent interest on any amount borrowed. The minimum amount you can borrow on Tala is KES 2,000 while the maximum amount is KES 50,000. You choose a repayment method which must be within a month, that is paying once in lumpsum inclusive if interest or in three weekly installments.
Branch loan app
Branch loan app charges a flat rate of 7.6 percent pm on all amounts borrowed. Branch requires one to have an active and authentic Facebook account which would be linked to your account during the registration process. Like other apps, you must be an active MPESA user. The minimum loan is KES 1,000 and maximum amount is KES 50,000.
Saida loan app
Saida loans app charges an interest of 7.5 percent pm. They have an interesting way of gauging your creditworthiness. Saida will check how you have been using your phone to make calls, sms, data and how you use mobile money services such as MPesa. It then sets your loans limit. Saida will notify you of the amount of money you can apply for. One can borrow up to KES 25,000 after growing your loan limit. It takes up to an hour for a loan to be processed.
In case one is unable to clear the loan in 30 days, the company has a policy where the client can talk to them and the debt is distributed to 90 days, of course with increased interest.
Shika loan app
The Shika loan app charges a facilitation fee of 15 percent of any amount of loan that is processed and repaid within 30 days. One can borrow a minimum of KES 500 and a maximum of KES 20,000. They impose a rolling over penalty of 10 percent for late repayment. It currently only supports MPESA customers.
Okash loan app
Okash loan app charges interest of 14 percent for a short loan repayable within 14 days. To qualify for Okash, one has to be between 20 – 55 years old. Personal details collected include your date of birth, educational level, marital status and monthly income. The app gives a minimum loan of KES 500.
Zawadi loan is an online platform that operates on a similar premise as Zidisha loans. They don’t charge a facilitation fee and takes about 2 – 24 hours depending on amount borrowed. Loan repayment ranges from one month to three months depending on type of loan. You should also be salaried for your loan to be approved on their website.
Costs that loans apps never tell you
You pay transaction costs which range from anywhere between KES 100 onwards depending on the amount of cash you are borrowing or repaying. What they call negotiation fee or facilitation fee, which is a certain percentage of the total amount being borrowed ranging from 2.5 percent onwards.
These monthly interest rates are way above the average cost of regulated banking credit that KBA puts at 1.1 percent.
The current legal regime of the digital lenders, which is outside the direct remit of the central bank, allows providers, both banks and others, to escape the government cap on interest of four points above the state benchmark interest rate, which now stands at 9 percent and caps credit cost at 13 per cent. ~ Kenya Bankers Association
How Kenyans use money acquired via quick loans apps
- 37 percent – business
- 32 – 37 percent – daily domestic needs in homes
- 18 – 23 percent – education
- 13 – 17 percent – airtime
- 10 percent – household goods
- 7 percent – medical emergencies
*Source – FinAccess survey 2019
Some mobile loans apps firms recently decided to limit first time borrowers to access only up to KES 4,000 due to the growing number of debtors.
Number of Kenyans listed on CRB by 2019
According to financial services consultancy Microsave, 2.7 million people were listed as credit unworthy by CRBs between 2017 – 2019. Most of the defaulters owed loans of KES 1000 or below.
What information about you do loan app companies and firms have
Information about you may be huge collateral for these loan apps. If you never read the fine print on the terms and conditions, then you are at a loss. Most of them collaborate with Safaricom, which has much of your personal info gotten from SIM registration. Below is a snapshot of an article for T&C for Timiza Account by Barclays Bank of Kenya:
“You hereby agree and authorize the Safaricom to share with the Bank personal information held by Safaricom pursuant to the agreement between you and Safaricom for the provision of Safaricom products and services and M-PESA Service including your phone number, name, date of birth, ID or Passport Number and such other information that will enable the Bank to identify you and comply with the regulatory “Know Your Customer” requirements (together the “Personal Information”). You also hereby agree and authorize the Bank to request Safaricom for information relating to your use of the MPESA Service, M-PESA System and Safaricom Services as the Bank shall require for purposes of providing you the Services (“M-PESA Information”). You hereby consent to the disclosure of the Personal Information and the M-PESA Information by Safaricom to the Bank and to the aforesaid use of the Personal Information and the M-PESA Information by the Bank.”