More than 3.2 million Kenyans are today negatively listed as loan defaulters with the country’s credit reference bureaus (CRBs) in an economy where job cuts and near stagnant wages has left thousands of people in a debt trap.
Data from the CRBs show that the accounts negatively listed has jumped from 2.7 million last year, most of them linked to mobile digital borrowers.
Non-performing loans in the banking industry rose to 12 percent last year, from 9.5 percent in 2017, the central bank data show, remaining into double digits for the first time since 2007.
This has triggered property seizures by banks and an increase in the number of defaulters reported to one of Kenya’s three CRBs, hurting the borrowers’ chances of being able to borrow more.
“As of Friday last week 3.2 million Kenyans were negatively listed against a total of 11 million records,” said Billy Owino, CEO of TransUnion Kenya in an interview with the Business Daily.
He said the majority of the negative listings were for loans tapped through mobile phones, add-ing that the average loan owed by the defaulting digital borrowers was Sh2,500.
Kenya has witnessed a proliferation of digital lenders targeting the banked and unbanked alike, saddling borrowers with high-interest rates and leaving regulators scrambling to keep up.
Market leader M-Shwari, Kenya’s first savings and loans product introduced by Safaricom and Commercial Bank of Africa in 2012, charges a “facilitation fee” of 7.5 percent on credit regardless of its duration.
On a loan with a month’s term, this equates to an annualised interest rate of 91 percent.
Tala and Branch, other top players in the mobile digital lending market, offer interest rates of 12.7 percent and 7.6 percent respectively for a loan borrowed over one month. The Tala loan equates to 153 percent over a year.
But the defaulted loans from players like Tala and Branch are not captured in the CBK bad debt data because they are unregulated.This has led to an increase in the number of defaulters reported to one of Kenya’s three CRBs — Metropol, TransUnion and Creditinfo International.The latest CBK data shows that loan defaults increased 55.6 percent in the three years to De-cember, hitting Sh333.3 billion or 12 percent of Sh2.77 million loans advanced.Bad loans as a share of total credit advanced stood at 5.6 percent and 6.8 percent in 2014 and 2015 respectively, a pointer to the bankers deteriorating loan bookThis emerged in a period when Kenya’s struggling […]