Branch,Tala among five lending apps operating illegally in Kenya. Kenyans asked not to repay existing loans

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Kenya’s government has threatened to revoke licences for Branch,Tala,Opesa,Okash and Zenka mobile loans apps as they operate illegally in the country. “We are urging the public not to clear the existing loans until a case is determined on how the Mobile lending apps acquired licences to operate. We are doing everything humanly possible to ensure that all business operations in the country follow the law” Dr. Matiang’i said.

Government’s statement came after a section of Kenyans raised complaints that the introduction of the mobile loan lending apps is a scheme to extort the poor. Majority of the unemployed population condemned Okash and Opesa management for charging exorbitant interests with an aim of siphoning from the masses. “I owed Okash and Opesa less than five thousands shillings a month ago,right now they are demanding close to nine thousands from me. I think the management of these two should be stopped by relevant authorities” Linus Maina told the press.

Many Kenyans are now hooked to several of such firms, sometimes being forced to borrow from one mobile loan app to pay another.

Mobile lender, Branch, which has over one million people using the application, recently raised Sh7 billion to deepen its ability to meet the rising demand for mobile loans. Branch currently loans out $4 million (Sh400 million) monthly and is one of the top five most downloaded apps in Kenya, according to Jumia’s Kenya Mobile White Paper 2018.

Many Kenyans are now caught in several mobile loans to service forcing them to jump from one service provider to another, according to Financial Sector Deepening Kenya (FSD- Kenya).High Court has ruled in favor of a suit by Consumer Federation of Kenya (Cofek) who had sued the Central Bank of Kenya (CBK) and CBA for non-compliance with the lending rates on M-Shwari service.

They are willing to give away part of their privacy- bank account information, mobile money balances, location, social media chats, text messages etc. – in exchange for loans. Mobile loan lenders depend on predictive analytics to score a customer’s credit worthiness

It is estimated that 18.2 million of Kenyans own mobile phones and 35 per cent of them have tried at least one digital mobile loan. About 20 per cent who have not said it was only because of lack of information. At the time of the survey,  FSD found out that about half of the borrowers had an outstanding loan.

The number of borrowers who spend the loans on consumption rather than use to generate more income is high, forcing some to be perennial borrowers. “Most borrowers use digital credit for business or to meet household needs. Education plays a very important role as well,” notes FSD.

With many borrowing for non-income generating purposes, about half of borrowers report to have delayed in repayment time, with men being more frequent culprits.Those who default say that they are forced to do so because of poor business performance, loss of source of income, poor financial planning or the fact that all the money was used on food and utility bills.

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