Why the Youth Need to Walk away from the Vicious Cycle of Mobile Lending
By John Riaga
When Interior Cabinet Secretary Dr. Fred Matiangi announced that all betting firms in Kenya have until July 1st to conform to government tax regulations, the picture portrayed was that of a nation engulfed in serious gambling that had become a threat to the moral fabric of the society.
In yet another study, Kenyans were ranked the 6th most depressed Africans according to a research carried out by the World Health Organization (WHO) in 2017. These two issues may appear unrelated, but a keen eye will easily identify the common denominator; money. In a country where circulation has dwindled over the last few years, Kenyans have been left on the lookout for any sources of money, legit or not.
Then came the revolution in the financial sector with the introduction of the mobile money lending applications, and predictably, Kenyans flocked the Apps looking for cheap and easy loans.
Today, according to statistics released by the Central Bank of Kenya (CBK), up to 2 million Kenyans actively transact through the numerous Mobile Money Apps, with the youthful population providing ready market for the mobile phone money lenders.
With only a National Identity Card Number, one can access loans from as little as KSh. 100 to as much as KSh. 100,000. The matter is even compounded by the fact that one’s borrowing limit increases as he or she continues borrowing.
For example, if one borrows KSh. 1,000 and pays back within the stipulated period, the next allowed loan limited will move from Ksh. 1,000 to maybe 1,500.
*Celestine is a vibrant young woman working for an International NGO in Nairobi. She actively uses the KCB Mobi Loan and has built her loan limit to KSh 85,000. Though she has never defaulted on paying back the loan, she lives in fear of being trapped into the culture of borrowing and repaying the loan.
“It calls for a lot of discipline, otherwise you are trapped into a circle where you are always borrowing and repaying constantly,” she says.
The high loan interest rates also come into play. While Celestine was advanced KSh. 85,000 in January, she had to pay back KSh. 89,000 after 30 days.
*Alice is a police officer recently recruited into the service. In a fairly young marriage, she is already listed at the Credit Reference Bureau (CRB) after she failed to pay back a loan of Ksh. 1,700 she got from yet another Mobile App, Jumbo Pesa. “I needed some cash urgently and a friend referred me to this App. I quickly downloaded the App and was eligible for KSh. 2,000. This was good money considering I was broke,” she says.
However, it took a good 12 days to be given the money and when it did come it was KSh. 1,700, and not the KSh 2,000 she had asked for. She was expected to pay KSh. 2, 350 after a week.
Though she considered this a rip off, she took the loan.
“Three months later, Jumbo Pesa is demanding Ksh.3, 620 from me including the accrued interest, and they have gone ahead to list me at the CRB”.
Not sure when she will settle the loan, Alice has to contend with the challenges of being listed at the dreaded CRB.
The Credit Reference Bureau is licensed by the Central Bank of Kenya to collect, store and collate credit information on individuals and companies and provide the information in form of a credit report upon the request of a lender. You are doomed, if you default on any loan repayment, whether from a big financial player or the small time Mobile Apps and you are black listed by the CRB.
A CRB report can either be positive for those with good credit reports, or negative for loan defaulters. Such information is made available for lenders or even potential employers.
Those listed are basically rendered powerless. This means that they are not able to get any financial advances from any serious lenders. In a society where it is difficult to develop without some loan facility to augment salaries for the employed, the country is looking at possible development stagnation. The situation is worse for the jobless youths who are then rendered financially useless.
Another borrower *Lilian says that she borrowed an undisclosed amount from the Kenya Commercial Bank (KCB) enabled Mshwari and two years down the line, she has not returned a coin to pay back the loan. Consequently, she has been listed at the CRB.
“My problem is not even that fact that I am listed, I am tired of their calls and texts threatening to come and auction me and my property to recover their money,” she said.
A debt recovery expert who sought anonymity expressed the challenges involved in trying to get debtors to pay back their loans. Apparently, most people are not scared about being listed anymore.
The questions are, what pushes young men and women into this spate of wanton and reckless borrowing? Why do these lenders make it so easy for their loans to be accessed by an increasingly vulnerable populace, with most of them defaulting on repayment?
Stakeholders are now calling for the government to consider some kind of regulation on these Mobile Apps money lenders, just like it is considering tougher operational measures against the betting firms in the country.
Youth Counselor and preacher David Odhiambo cautions young people to stay away from what he terms temptations that the devil is using to entangle them into constant debts.
“I believe it is the work of the enemy that our youths are entangled into an unending web where you are always borrowing and struggling to repay,” he says.
He shares some Biblical insights on the matter of borrowing and being in debts that he says are indications on what God desires of his children. For instance, Proverbs 22:7 says that the borrower is a slave to the lender while Psalms 37:21 says; “The wicked borrows but does not pay back, but the righteous is generous and gives.”
According to Odhiambo, these texts are indicators of what God thinks about this trend that has gripped Kenyan youths.
The mostly unemployed youthful borrower remains in a vicious cycle with common trend of “borrowing from Paul to pay Peter.” What this means is that one borrows from one App, to pay another App.
Unless the government places some sort of regulations on the mobile money lenders the many people will end up nursing financial stress.