More than 7.6 million Kenyans have loans from multiple mobile loan apps with 2 per cent of these defaulting and being listed with the Credit Reference Bureaus (CRBs) in the country.
In a report by Metropol Corporation, more than 380,000 Kenyans have so far defaulted on loans taken from the mobile money lenders.
Due to this, the Kenyan parliament through the Information, Communication and Technology (ICT) Committee has urged the Central Bank of Kenya (CBK) to create regulatory measures of the sector especially on interest rates charged by the mobile money apps.
Metropol notes that on average, a borrower in the country has loans from at least six out of the 10 mobile money lenders.
This is despite the fact that mobile money loan apps charge unregulated interest rates.
Mobile lenders’ meteoric growth in Kenya
And to show how successful the lenders have been, Mobile lender Tala has disbursed loans to over 2.5 million customers globally. The lender targets ‘emerging markets’.
This was revealed during the celebrations to mark the company’s five year anniversary.
Mobile phone lenders in Kenya have grown in leaps and bounds and they are now more than 10.
Tala launched in Kenya as Mkopo Rahisi in 2014 and it claims to have been the first in the world to offer unsecured mobile lending directly to consumers.
During the celebrations, Tala said that it has expanded credit access across Kenya. This is by using alternative data to instantly underwrite and disburse credit to people who have been excluded from traditional finance.
This exclusion is brought about by a lack of credit history or formal records.
The head of Tala’s Kenya business, Ivan Mbowa, says that Tala has changed the way people and small businesses operate and has become a major vehicle for progress throughout the country.
“Financial inclusion is an important condition for sustainable and equitable growth. Over the past five years we have witnessed first-hand the socio-economic impact of digital lending amongst households and micro-entrepreneurs,” Mbowa said.
Tala’s Google Play store ratings, referrals
“With over 90 per cent loan repayment rate, Tala has been the difference for millions of Kenyans hustling their way into the global middle class. Their trust in us is measurable and reflected in our top Google Play store ratings, referrals to family and friends and consistent calls from customers for more products and connection to their lives.”
Tala remains the largest non-bank fintech in the market having pioneered the use of non-traditional credit underwriting to create financial identities and provide much-needed liquidity for the underbanked.
“We have made significant progress in the past five years. Our loyal customer base has been growing steadily and we have managed to retain our leading market share notwithstanding growth and competition in the industry,” said Shivani Siroya, Founder and CEO of Tala.
“We take pride in the work we have been doing, and as we face the future, we are well positioned to connect millions of Kenyans to financial services that can advance their lives.”
Mobile lenders not only mean financial access for those who have never had it but also economic development for whole markets.
Tala has an established customer base in Kenya, Tanzania, the Philippines, India, and Mexico. It is looking to expand to several other countries in the next five years.
Fintech has brought a new paradigm to the design and implementation strategies for financial inclusion. In Kenya, the last five years have been characterized by a surge in Fintech growth with parallel progress in financial inclusion.
Mbowa adds, “Our credit product was designed to meet the immediate needs of the emerging middle class, but our technologies have the power to fulfil so much more. We are set to launch a number of initiatives intended to accelerate the development of products and service solutions that have the potential to transform financial services.”
Mobile lenders in Kenya
There are about 12 popular mobile lenders in Kenya currently with each offering credit to the same market segment.
While some mobile money lenders are affiliated with banks, none operates without having to ride on the telcos’ back.
The biggest beneficiary is Safaricom through its M-Pesa platform.
Instant loan approvals happen for customers who need mobile loans of between Kshs100 to Kshs 50,000. This money is then deposited directly into their M-Pesa accounts.
Among the newest mobile money loan app in Kenya is Zenka which has an edge over many since it gives the first loan free.
Zenka is owned by Zenka Finance and they promise loans from as low as Kshs 500 to KShs 20,000. The loan is repayable in 30 days.
The other mobile loan apps are partnerships between banks and Safaricom. They include Mshwari which is a product between the Kenyatta-owned Commercial bank of Africa (CBA) and Safaricom.
There is also KCB M-Pesa which is a product between Kenya Commercial bank (KCB) and Safaricom, Timiza from Barclays and Housing Finance’s HF Whizz.
Kopa Chapaa is a partnership between Airtel and Faulu Kenya where one has to have used Airtel Money for six months to qualify for a loan from KShs 500 to KShs 100,000.
Other popular mobile money lending apps include Branch, Saida, Haraka, Zidisha, Stawika, and Shika Loan. mKey allows one to send money to several mobile wallets including M-Pesa, Equitel and Airtel money.
Another indirect loan app is OKOA Stima which is a partnership between Kenya Power and Safaricom. It is used exclusively to pay for electricity.