Latest data from the Credit Reference Bureau (CRB) has detailed the ballooning defaulting on loans by Kenyan youths.
With 17 million eligible borrowers, the youth form the majority and have devised new ways of beating the system to acquire fresh loans despite defaulting on the ones already taken.
The CRB report indicates that the youth exploit loopholes in sim card registration process to borrow money and then throw away the sim cards used. Some alter their official details to cheat the system.
Others conceal their identity while acquiring credit from different lending platforms, with no intentions of paying back.
According to the Metropol Corporation Managing Director, Sam Omukoko, the new tricks being employed by the youth to acquire credit is unlawful.
"They take the money and throw away their sim cards, get another one, borrow and again destroy the sim card. Some take the loans but they have no money to repay while others take the loan but before repaying, they lose their jobs," Omukoko stated.
"We have 19 million Kenyans listed in the CRB, out of which 17 million are eligible borrowers but over 2 million of them are defaulters and therefore cannot access loans from any financial institution."
According to the data, the borrowing time peaks around 2am and 5am with a majority of the borrowers being Nairobi residents.
"There is a lot of online borrowing between 2am and 5am with a majority being Nairobi residents. Upon investigations, we realised that they were small-scale traders at Gikomba market and slum dwellers," Omukoko remarked.
A financial expert, while addressing the increasing appetite for loans, noted that most young Kenyans survive on mobile money borrowing, saying those who have a good rating with CRB will continue enjoying the lending services.
"Majority of Kenyans borrow for consumption and in the long run they become heavily indebted since the mobile loans are very expensive," an economist stated.
President Uhuru Kenyatta, during the onset of the pandemic, announced the moratorium on negative listing with CRBs of borrowers with loans below Ksh5 million for a year, cutting credit information sharing in the banking sector.
The Central Bank of Kenya (CBK) warned that commercial banks could restart rationing loans following the suspension of blacklisting of such defaulters.
The suspension was part of the measures to cushion borrowers from the effects on the pandemic.
Nearly 730,000 jobs were lost when Kenya imposed containment measures that led to layoffs and pay cuts, but the country’s economy is on a recovery mode.
