Episode 96: Mobile Lending in Kenya
Otherwise?
Episode 96: Mobile Lending in Kenya
Mobile lending in Kenya has experienced a boom in recent years. Customers are able to apply for and receive loans through their mobile phones, and this has drastically changed Kenya’s financial landscape. Mobile lending is made possible through mobile money transfer technology, which was introduced in Kenya by Safaricom in 2007 via MPesa. There are three primary ways that it works: The first is bank backed, the second is mobile lending by non-bank finance institutions such as microfinance institutions and SACCOs, and the third is mobile lending by financial technology firms which do it through their mobile apps.
We’re joined by Geraldine Lukania, Project Manager of FSD Kenya‘s Market Information Project to discuss mobile lending/credit, what makes it so popular, and whether it needs to be regulated. Press play!
Resources
Kenya moves to regulate fintech-fuelled lending craze
M-Shwari leads Mobile lending industry
The Draft Financial Markets Conduct Bill, 2018
The 2019 FinAccess household survey
The 2016 FinAccess household survey
Digital Market Overview: Kenya
The digital credit revolution in Kenya: an assessment of market demand, 5 years on
A Digital Credit Revolution: Insights from Borrowers in Kenya and Tanzania
Kenya’s Digital Credit Revolution Five Years On
How Regulators Can Foster More Responsible Digital Credit
3 thoughts on “Episode 96: Mobile Lending in Kenya”
I have been analyzing the reports from FSD and CGAP and discovered they are usually pro-consumer and mostly biased against lenders thus they ignore the main market factors, leading to the assumption that some regulations will solve the lending issues. Lawmakers should ignore those biased views.
By asking digital lenders to issue loans at 13% to risky borrowers who couldn’t obtain loans from banks at the same 13% beats all reason.
Banks loan out money raised from low cost public deposits and their borrowers are mainly low risk, digital lenders use costly funds raised privately and their borrowers are mainly high risk, you cannot logically expect the two to charge the same interest.
Default rate from such risky borrowers is over 18%, in simple maths, 13% interest means 5% loss and only a nonprofit would run such a business.
Therefore, such regulation will just force the lenders to exit and push the risky borrowers to the black market(shylocks/loan sharks) leading to the country losing all gains made by increased financial inclusion.
Hey Jim, I’m also pro-consumer and pro-citizen, which as you may have noticed is the lens of this podcast. Thank you!