Kenya is one of the pioneers when it comes to igital loans and mobile money transfer services with M-Pesa, Airtel Money leading the way.However, with the innovations in mobile money come new challenges. This time it is not the lack of money but maybe having too much of it. Loans have become a way of life. We need to sustain ourselves beyond a paycheck and that is where business comes in. Kenyans are highly entrepreneurial. Most people work full time and do something else on the side as a ‘side hustle.’ Recently, online business has become a major source of income with cheaply sourced items from the Asian countries like China.
Kenyans have entrepreneurial spirits and they must be financed. Outside the salary, there are several digital loans available such as Safaricom’s M-Shwari, KCB loan, Equity, and now Barclays. There are also Silicon Valley-backed lenders such as Branch and Tala, which have made headway in Kenya, circulating loans in billions. They have financed businesses, acted as emergency loans and some extra cash for the weekend.
However, with the good comes the bad and the Kenyan government is seeking to regulate the rapid money lending. Several companies start in Kenya to build momentum before they expand. This has resulted in millions of defaulted loans. According to a study by Micro-save, a company that offers advisory to lenders, more than 2.7 million have been blacklisted for defaulting loans. This results from the high interest by some of the lenders.
Several fintech lenders have credited their move into Asia, Africa, and Latin America to help billions with no bank accounts or money-lending services to enable them access to economic resources. The Central Bank Governor, Patrick Njoroge, says regulations should be put in place with main responsibility falling on the lenders. Meanwhile, Capital Markets Authority CEO says that Kenya is learning from South Africa after the collapse of Africa Bank due to unbridled bank lending. This means Kenyans need to be cautious with the digital loans. The Finance Ministry has drafted e Bill on financial regulation, which seeks to cap interest rates to protect Kenyans from exploitative fintech startups.