How gullible Kenyans are losing cash to rogue mobile lenders

Kenyans are losing their hard-earned cash to rogue mobile lenders who take advantage of the regulatory vacuum to extort cash and personal data from unwitting users. A recent study conducted by the government, Financial Sector Deepening (FSD) and the Bill and Melinda Gates Foundation found that dozens of mobile lending apps are operating with virtually no regulatory controls. The apps also set arbitrary fees, and are often malfunctioning. This comes at a time when more Kenyans are taking to mobile loans for their credit needs, with pressure mounting on the Central Bank of Kenya (CBK) and the National Treasury to come out with a regulatory framework for the rapidly growing sub-sector. The study explored 110 digital credit products available as of September last year. It found that close to half of them could not be accessed largely owing to the apps’ instability or sign up fees with dozens of apps disappearing after harvesting users data. “In September 2018, the two main app stores had approximately 110 mobile apps provided by 74 unique developers listed as offering digital credit,” said the report in part. “As of April 2019, 65 of these apps had been pulled down from the app stores, while 47 new ones developed by 43 unique developers had emerged. There was an unprecedented rise in the number of apps published in 2018, from 14 in 2017 to 49 in 2018.” Online banking Mobile lending products have grown in popularity in the country over the last half-decade due to increased adoption of smartphones and availability of products. This has seen numerous service providers lure borrowers seeking for convenience. Several banks in Kenya with large loan books, including Equity Group, KCB Group and NCBA now process the bulk of their loans via mobile phones. They also use online banking, with fewer customers visiting the physical branches. The tightening credit conditions by commercial banks fuelled by the Banking Amendment Act 2016 – that has since been repealed drove more borrowers to mobile lending. The demand for digital lending products, however, continues to grow in tandem with Kenyans’ need for loans. Lack of a clear regulatory policy to guide the scope and limit of operations has, however, opened the field to any operators who can develop an app to launch a lending product and attract users. “The most egregious of these are lenders that are neither non-banks or non-deposit taking Saccos but […]

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