As people send money to Kenya, the thing on their mind is convenience and security since mobile to mobile money transfer has guaranteed safety by the fintech companies.
Mobile money loans in Kenya have become common among users pioneered by the likes of Safaricom M-Pesa and now with other lenders like Tala Kenya through the Tala loan app.
While fintech events and services are at every corner on Kenyan streets, there still remains a gap in associations that address issues regarding the fintech industry in the country.
Fintech companies in Kenya
There is a great opportunity in the Digital Financial Service (DFS) Sector and Kenya has been in this space since the launch of M-Pesa in 2007.
Two years into its second decade, M-Pesa has made significant strides in driving financial inclusion not only in Kenya but also across the continent and beyond.
And building on the success of M-Pesa, the fintechs causing ripples in Kenya include Cellullant which has expanded to nine other African countries since its founding in 2004.
Grass root Bima is an insurtech company to offer insurance services. Established in 2016, the company’s WazInsure manages the entire insurance value chain from underwriting to claims payments.
Mkopo Rahisi rebranded t0 Tala, a micro-credit loan smartphone application. Tala’s main top markets are Kenya and the Philippines. It operates in East Africa and Southeast Asia.
Using blockchain technology, Bitsoko integrates blockchain with mobile money to reduce or completely remove the cost of transactions between individuals.
The mobile wallet received a US$100,000 grant through the Grand Challenges Explorations (GCE) initiative of the Bill and Melinda Gates Foundation in 2015.
Bitsoko increase access to payment services.
Microlending platform, Branch International, was launched in 2015 and it allows customers access instant loan via their smartphones.
Online payment gateway JamboPay offers customers a secure platform to make and receive mobile phone payments over the internet.
JamboPay has over 1.8 million subscribers providing payments to over 3,500 organisations in Kenya, Rwanda, Tanzania and Uganda.
Launched in September 2012, Umati Capital focuses on the provision of credit and related payment technologies.
Web and mobile software builder Abacus creates avenues for investors to access the African financial markets. Abacus allows investors from anywhere on the globe to research and invest in real time, anywhere in the world.
There are many more fintech companies in Kenya.
Common interests of the digital lending industry
With the needs gap, digital lenders in the country have announced the launch of the Digital Lenders Association of Kenya (DLAK) to promote industry best practices.
DLAK will also help drive a coordinated approach in addressing the emerging industry’s pressing issues.
Incorporated in 2019, the DLAK brings together leading digital-first lenders and other key investors to represent and promote the common interests of stakeholders. These include digital lenders, consumers and the digital lending industry.
Members will work together to set ethical and professional standards in the industry. They will also work to collaborate with policymakers and other stakeholders in addressing cross-cutting issues.
DLAK also seeks to drive the overall growth of the fintech sector in line with the Economic Pillar of the Vision 2030, MTP III, and Uhuru Kenyatta’s Big Four Agenda.
The Association is open to all ethical digital lenders subject to signing and demonstrating the commitment to the DLAK Code of Conduct.
DLAK has 12 founding members namely, Tala, Alternative Circle, Stawika Capital, Zenka Finance, MyCredit, Okolea, LPesa, Kopacent, Four Kings Investment T/A Sotiwa.
Others are Kuwazo Capital, Mobile Financial Solutions (MFS), and Finance Plan Ltd who have defined the Code of Conduct that members are required to adhere to.
The association’s chairperson and Zenka Finance CEO Robert Masinde said that digital lenders came together to form the association to help each other address pain points in the industry.
Their coming together will also make it easier for them to engage with the government on regulations for the sector and creating good practices for industry development.
“A vibrant and diverse digital lending sector has successfully established itself in the country and we feel the time is right to give it a voice and promote global best standards,” Masinde said.
Adding that: “DLAK will enable digital lenders to speak with a common voice, promote best practices, and influence how the sector develops while promoting the ethical business practice to the benefit of customers.”
Evolution of technology backed lenders
The Association’s strategy, as well as the issues to be addressed by DLAK, will be determined by a Strategic Committee in which each member company will be represented by its institutional head (CEO, Managing Director, Country Manager etc) or another member of their Executive Board.
Currently, it consists of Robert Masinde (CEO Zenka), Rose Muturi (Vice Chairperson and Chief Digital Officer HF Group), Kevin Mutiso (CEO Alternative Circle), Allan Mukui (CEO Kuwazo) and Ivan Mbowa (Regional Country Growth Manager Tala).
DLAK Vice Chairperson Rose Muturi emphasized that the aim is to create the right environment for technology backed lenders to evolve. She says this will eventually result in sustaining the fintech sector.
“Over the last five years, we’ve seen first-hand the challenges that digital financial service providers face. This is in their efforts to sustainably offer products and services that address the unique needs of underserved customers,” she said.
Muturi added that the association will incentivize the growth of digital lending models as a way to promote greater financial inclusion and extend high-quality financial services to underserved communities and businesses.
“I see great benefits for all stakeholders in bringing this know-how together to improve regulation landscape and standards in the industry,” Muturi opined.
DLAK Code of Conduct
DLAK will initially focus efforts on dealing with the regulatory challenges that presently require attention while promoting ethical business practice in the industry. It will also run consumer sensitization programmes.
In the mid-term, the association is targeting activities and initiatives to leverage the combined know-how of the industry in order to foster the quality, safety, and reliability of the services and products for digital lending customers.
All the current members have signed the Code of Conduct.
The Code represents an ongoing effort to continually evaluate how digital lending industry can best serve the customers, respect the efforts of regulators, and set useful precedents for how digital lenders contribute to the financial ecosystem.
Creditworthiness of Kenyans
Despite the success of fintech companies in Kenya, many have become traps messing the creditworthiness of Kenyans.
Loan defaulters are listed by the three Credit Reference Bureaus (CRBs) licenced by the Central Bank of Kenya (CBK). The three CRBs in Kenya are Metropol, Transunion and Creditinfo.
Fintech lenders forward the list of defaulters to the CRBs. To curb the problem of defaulters claiming they were not informed of the listing, CBK has published draft CRB regulations 2019 prohibiting them from listing any customer without informing them.
In the regulations, financial institutions should inform the affected person of the intention to report them to the CRBs.
This should be in writing or through an electronic means. A second communication should be issued informing them about the listing before having them listed with the CRBs.
“An institution and a third party credit information provider shall notify the customer within one month before a loan becomes non-performing that the institution shall submit to a bureau the information on the loan immediately it becomes non-performing,” the draft stipulates.
CBK Governor Dr Patrick Njoroge has discredited banks using the credit score as a tool for punishing customers. He has instead been asking them to offer better rates to those with good scores.
If the proposals sail through, customers’ credit scores will be just one of the factors they will need to use to decide on who to issue loans.