How Kenya's Loan Sharks Track Loan Defaulters

  • File image of a man using a phone
    File image of a man using a phone
  • A number of mobile money lenders in Kenyan are said to employ underhand tactics in an attempt to recover money from loan defaulters.

    The current Covid-19 pandemic saw the number of loan defaulters rise sharply as many were unable to meet their financial obligation given the circumstances.

    Available data shows that more than 3.2 million Kenyans have been blacklisted by the country’s Credit Reference Bureaus (CRBs) compared with 2.7 million last year, with a huge chunk of them being linked to digital loans.

    Digital apps have become an important part of the credit system in most households in Kenya and to small-and medium-sized businesses (SMEs).

    File image of Kenyan banknotes
    File image of Kenyan banknotes

    However, it has also been argued that borrowers often lack adequate information on the cost of the facilities. This lack of information has left many in shock especially when the lenders knock on their doors seeking their money.

    Meanwhile, lenders have continued to use various tactics to make sure they get their money back.

    Here are some of the tactics employed by loan sharks to recoup their money. 

    Spamming phone calls and texts

    They have been known to make incessant phone calls, using different phone numbers to force defaulters to pay.

    Speaking to, a defaulter only identified as Ben narrated how he has been receiving at least 2 phone calls a day from a mobile loan company.

    "I have had to cut down on everything following the pandemic. My barber shop was hit hard by the pandemic. I am willing to pay up, but unable to raise any money," he revealed.

    This has resulted in him ignoring calls from numbers that are not on his contact list, a strategy employed by a huge majority of the defaulters.

    Some go as far as blocking all the numbers from the creditors, and reporting them as spam.

    Some mobile money lenders send messages via phone, some loaded with threats and others simply urging borrowers to pay up and enjoy a form of discount.

    Advertisement in dailies

    There are instances when lenders publish information on the dailies especially where a loan beneficiary deposited a logbook as a form of security for the loan. Some lenders will publish information seeking details of the car and seek references or details on how to locate the said car. They will go ahead to offer rewards to anyone who will provide information that will help them locate the car.

    The promise of rewards during the pandemic period has seen the strategy work as many are willing to offer leads and collect the cash reward. 

    Sending scouts in disguise 

    Shylocks have been known to send agents to collect information about a potential client before approving a loan reward.

    Masked as a routine check to establish the borrowers physical location, these counts take note of any movable assets during the process.

    Once a borrower defaults, the loan shark swiftly employs the services of the auctioneer in a bid to recover their money.

    Unknown to many, Shylocking under whatever guise is illegal. 

    Public shaming

    This particular technique sparked an uproar earlier on in the year.

    When applying for a loan on most of the mobile money apps, users don't often read the fine print.

    File image of a man on his phone
    File image of a man on his phone

    This results in clicking 'ok' and unknowingly granting the lender permission to call or text contacts on your phone once you default.

    A number of Kenyans confessed to having had their spouses, parents or in-laws call them up after receiving an unexpected call from the debt collector.

    Using 3rd parties 

    Once the lenders notice a pattern of non-willingness to pay or respond to phone calls, they turn to third parties.

    These companies are made up of debt collectors who specialize in pushing the borrowers to pay up, mostly with threats touching in police involvement.

    They also primarily use phone calls and texts as their mode of communication

    CRB blacklisting

    Up until 2019, Kenyans found themselves excluded from financial services after failing to pay loans amounting to as little as Ksh 500. Around 2.7 million Kenyans have been blacklisted by CRBs in the last 4 years. 

    However, in April 2020, the Central Bank of Kenya (CBK) barred unregulated digital mobile lenders from forwarding the names of loan defaulters to credit reference bureaus (CRBs) and stopped the blacklisting of borrowers owing less than Ksh1,000.

    Data contained in a 2019 report by the Credit Referencing Bureau (CRB) showed that mobile loan defaulters are likely to default again on new loan issues.

    The rate of default for the average three-month tenured loans was meanwhile calculated at 10.7% or an equivalent Ksh 1.8 billion.

    According to global consultancy firm McKinsey, Kenya is experiencing a sharp growth in the digital space and revenues from the country’s digital segment are expected to surpass the Ksh 500 billion mark by 2022.

    Central Bank of Kenya (CBK) building in Nairobi.
    Central Bank of Kenya (CBK) building in Nairobi.
    Simon Kiragu