A study has shown that a haste late night digital loan borrowing by phone is highly likely to land you in the Credit Reference Bureau (CRB) blacklist.
According to the study by Consultative Group to Assist the Poor (CGAP), this borrowing often affects the youth aged between 18 and 24 years because they are jobless and seeking for easy money to meet an urgent need.
In the report warning lenders, the study also revealed that first-time borrowers are highly likely to default and are attracted by the easy-to-access policy and may struggle to repay later.
Out of all borrowers who fell in the above age bracket, the non-governmental organisation records showed that 75% did not manage to repay the loans on time.
The institution further revealed that 16% of the first time borrowers sought loans elsewhere to repay.
20% are reported to have cut back on their food expenses and another 6% dug into their school fees to settle the debt which is usually given a one month grace period.
As of March 2017, Central Bank of Kenya records showed that digital loans arm of commercial banks approval rate had increased by 53% while that of mobile money had gone up by 81%.
However, the ratio of the Digital non-performing loans of the banks is generally higher than that of the non-digital. This is due to the high risk involved and increased rate of blacklisting.
The ratio of non-performing digital loans stood at 11.4% against that of all banks loans at 9.69%
The study proposed lenders to be barred from presenting names of first-time defaulters to the CRB because it affects their loan approval chances in future. Some are blacklisted for as low as Ksh 50.
