10 Facts About Mobile Loan Apps in Kenya

  • The rising popularity of mobile loan apps in Kenya is attributed to their accessibility, flexibility, and efficiency in granting loans.

    Unlike banks which tend to be more rigid in their loaning programs, mobile loan apps in Kenya are accessible to all android phone users including the marginalized, remotely located and unbanked populations.

    Some of the popular mobile loan platforms in Kenya today include Branch, Tala, Utunzi, Stawika, Haraka, Saida, Okolea and M-Shwari which are accessible to Android mobile phone users save for M-Shwari which is based on USSD technology.

    [caption caption="Tala - one of the mobile loan apps"][/caption]

    As you contemplate taking up that mobile loan, we believe these ten facts will give crucial insight into your choices.

    1. How long does it take to receive the loan after application

    One of the interesting facts about the mobile loan apps is the short time taken to process your loan. Most mobile loan apps disburse funds either instantly or within 10 minutes of application.

    Most of these apps are connected to mobile money transfer platforms where the money is sent shortly after application.

    2. How does the app know if you're eligible for loan

    Most of the apps to determine your creditworthiness by analyzing and evaluating a wide range of data points to assess using the system algorithms.

    A loanee allows the app to collect this data by accessing phone information including phone details, SMS logs, Social Network Data, GPS data, call logs, and your contact lists.

    3. Minimum and maximum loan amount

    The loan limit is nearly uniform across the mobile loan apps with a specified minimum loan of Ksh250 and a loan ceiling of Ksh50,000 for apps such as Tala and Branch.

    On the other hand, customers using the Utunzi app have a higher loan limit of between Ksh 500 and Ksh100,000.

    [caption caption="A message from M-Shwari "][/caption]

    4. Loan eligibility requirement

    For one to be eligible, an active Facebook and M-Pesa account is a basic requirement for mobile loan apps such as Branch. Besides, the loaning company analyzes the data collected by the apps from the applicants' android phone.

    5. What determines your loan limit

    Other than the data collected, the loan limit is also determined by one's credit history including the efficiency in repaying previous loans. Successfully paying loans within the specified time raises your limit for consecutive loans.

    6. What happens when you default

    Unlike formal banking institutions, mobile loan apps are more susceptible to defaulting which makes them resort to blacklisting culprits to the Credit Reference Bureau (CRB).

    On the other hand, for instance, a rollover fee of 7.5% is applied by Mshwari upon the lapse of the 30 day repayment period, with Tala charging a penalty fee of 5% on the outstanding loan amount.

    7. How do you get the money

    The mobile loan apps disburse the loaned out money through the M-Pesa money transfer platform. Similarly, repayment of loan is done through the same using specific Paybill numbers.

    The repayment is flexible allowing users to repay a loan for a friend or relative.

    8. What is the process of getting a loan

    For one to access the money, you need to download the app from Google Play and fill in a questionnaire form that captures your personal details.

    Once you're done, you log in the app to check your loan limit displayed. Some apps like Saida allow you to choose your repayment duration. The last step involves accepting the terms and conditions of the loan agreement,

    9. What are the interest rates

    The interest rates vary from one app to the other. For instance, Branch charges between 10% - 23% depending on the amount borrowed, Tala, on the other hand, charges a fixed interest fee of 11% if you repay weekly and 15% if you pay monthly.

    M-Shwari charges a 7.5% facilitation fee where no transactional charges are applied when moving money between M-Shwari and M-Pesa. M-Shwari allows users to earn up to 5% interest on savings made on the platform.

    10. How long does it take before making the first repayment 

    Most of the of mobile loan apps offer a period of one month before the first repayment is due. Some apps such as Tala allow users either to repay the loan in a lump sum monthly installment or the cheaper weekly installments at 7 days intervals. 

    M-Shwari gives an extended 7 days grace period applied before fines are made after the lapse of the one-month duration.

    Speaking to Kenyans.co.keJoseph Chege, a financial advisor at a local bank, indicated that the mobile loan apps have forced banks to rethink their loaning strategies.

    "The apps have made banks more innovative by automating loan disbursement requiring them to invest in systems utilized in credit scoring.

    "Besides, banks have had to continuously improve their systems to ensure that anomalies such as account turnovers manipulation are detected by the systems hence increasing the discriminatory power of the rating model," Chege stated.

    Whether you want the money for an emergency or a capital boost for the expansion of your business, the mobile loan apps may be the next source of funds you need to consider.