Trouble with loans is lack of transparency
Since 2012, more than 50 institutions offering mobile phone loan solutions have emerged in the Kenyan market.
Since 2012, more than 50 institutions offering mobile phone loan solutions have emerged in the Kenyan market. And big financial players such as banks have not been left behind. According to recent research by FSD Kenya, 35 percent of Kenyans have borrowed from a digital lender.
The main reason they do so is to cater for their day-to-day household needs, some of which cannot be met in an increasingly high-cost-of-living economy with reduced incomes.
Data shows 47 per cent of Kenyans have paid a loan late, and 12 per cent have defaulted on a loan. Several digital lenders have been accused of using predatory methods to recover high-risk loans. These methods are designed to shame the borrower into paying back by threatening their social standing, position and dignity.
This behaviour has been criticised globally as unethical, especially among lenders who purposely hide information about their extremely high-interest rates, and who hide other nasty surprises in their terms and conditions. A public outcry about this has led to long-awaited and essential increases in regulation of these platforms. Kenyans are familiar with these apps, and with the repercussions of bad loans in their day-to-day lives. Furthermore, Kenyans have also seen how unfettered access to credit has played out at the national level.
Vanished and misappropriated
For decades, Kenyan newspapers have reported fresh millions and billions of dollars entering the country for stated development projects, most commonly infrastructure, health, education, agriculture and so on. Kenyans are also alive to the alarming ease with which these public funds are reported as vanished and misappropriated, with little to no effective follow-up to find the thieves.
We are living in constant fear of the moment the grace periods for huge government loans end, paving the way for massive amounts in repayments. A large amount of these will be taken from the public in the form of taxes, and the government has shown no mercy.
Despite the systemic economic downturn occasioned by the pandemic, taxes on fuel have gone up and the taxman has found many new ways to tax nascent businesses, as digital and hospitality entrepreneurs have recently found out.
What has led us here is the lack of transparency and accountability as regards the real details we need.
Exactly how much do we owe? What do interest rates look like? What loans have we paid back before and what was that process like? How will available resources be moved to make that happen, especially during a pandemic and in a country already beset with loss of lives and jobs? These are some of the conversations Kenyans are clearly ready to have more publicly.
All Kenyans are participating in repaying these loans back, one way or another: we are clear that credit in and of itself is not the issue.
What we need to be sure of is that we are taking good loans, whose funds are spent appropriately for us all to see, and whose terms and conditions we can live with.
