Alarm Over Numbers of Mobile Loan Defaulters in Kenya

  • Currently, there are more than 380,000 Kenyans that have so far defaulted on loans taken from mobile money lenders according to a comprehensive report by Metropol Corporation CEO, Sam Omukoko.

    Even though there is a sense of acceleration of loans acceptance rate, the Credit Reference Bureau (CRB) indicates that the default rate stands at 2 per cent of the total accounts.

    On the other hand, the number of Kenyans with multiple loans from multiple mobile lenders stands at 7.6 million.

    Such translates to around 40 per cent of the total number of 19 million Kenyans with loans from the mobile money lenders in the country.   

    Metropol CEO Sam Omukoko with Rafiki Deposits George Mbira [COURTESY: THE STAR]

    On Thursday, the Information, Communications, and Technology Committee of Parliament was urged to direct the Central Bank of Kenya to actively engage in measures of regulation of the sector; primarily on the platform of interest rates charged by the mobile lenders.

    The growth of the financial sector in relation to the mobile lenders is attributed to the initial introduction of interest rate caps in 2016 that resulted in many individuals and Small and Medium Enterprises (SMEs) denied loans by banks.

    While giving the report, Omukoko stated, “The increase is attributable to the introduction of a credit reference bureau in the country which has seen the number of mobile borrowers increase from 5 million eight years ago to an excess of 19 million,” noted the parliamentary committee on Thursday.

    Omukoko also revealed that each borrower in the country has a loan from at least six out of 10 lenders on average.

    The country has also experienced a rapid increase in the number of the mobile lenders which is in the tens.

    Operational trends of the lenders show that they charge interests rates that are unregulated and offering loans that may be accessed for as short as a few minutes or hours.

    However, some of the least of the lending rates are still above the 13 per cent mark of traditional banks while defaulting are more than 100 per cent.

    Omukoko informed that the high-interest rates charged have pushed non-performing loans in Kenya in margins of 12 per cent.

    People seek loans for many reasons like paying bills and betting but also for purposes of settling other loans.  

    Common names to Kenyans with regards to mobile lenders are M-Shwari, Tala, Branch, Okoa, O-kash, and the most recent Fuliza.

    A screenshot of Tala on a mobile phone