How to make mobile loans work for you

How to make mobile loans work for you. Photo | Photosearch

What you need to know:

Before you take a mobile loan, you must check the terms and conditions and the fees you will pay back on top of the interest rate.

Be intentional about what you want the loan for. 

“Keep off mobile loans. They are too expensive and easy to misuse,” experts often tell us.

But we still reach out for the razor. Currently, Kenyans are taking fuliza loans worth Sh1.6 billion every day in a sign of growing economic and financial distress that is leaving thousands of us at the mercy of mobile lenders. 

Like many of us, you may find yourself in a fix and in need of an emergency loan. A mobile loan looks like an instant remedy. How then can you use the mobile loans as an effective rescue plan?

Robert Ochieng the CEO and co-founder of Abojani Investment says that mobile loans work for those who have a regular income and seek to attend to an emergency, especially one that's urgent. However, financing short-term projects or inexpensive home furnishings may also work with mobile loans, especially when one does not want to touch long-term savings. “This is on the premise that one would repay within a month from their income,” he says.

Before you take a mobile loan, you must check the terms and conditions and the fees you will pay back on top of the interest rate. “Each of these loan services is different and it is important to know what you are expected to pay so that you can plan well. Some loans charge a service fee based on the original amount of the loan, processing fees, interest rates, and rollover fees,” she says. 

Rhina Namsia the founder and chief executive officer of The Acemt Consulting, a training, and consultation company that provides financial planning and investment advisory adds that some loans have an access or maintenance fee and these can be charged daily, monthly, or yearly. “These types of fees add up so quickly and make the loan extremely expensive. With this type of a loan it is important to repay it back immediately,” she says.

Example: If you take two loans of Sh5000 each;

Rhina says:

 Loan A has a one-time service fee of 10 percent for 30 days. Your service fee would be Sh500 with a total of Sh5,500.

Loan B has a one-time service fee of 5 percent plus a daily fee of Sh30.

“On the first day of the second loan, you would owe 5 percent x 5000 and a daily fee of Sh30. The total is Sh5,280. On the second day you’d owe another Sh30 and the total due would be Sh5,310,” says Rhina. “By the 30th day, you would owe Sh900 in fees plus Sh500 on one-time fees. The total you will owe by day 30 will be Sh6,400.” She says that even though Loan B looked cheaper at the beginning, it will be expensive in the long term.

The top mobile loans charges

  1. Mshwari/KCB M-Pesa Loans

According to Rhina, the minimum amount you can borrow on MShwari is Sh100 whilst on KCB M-Pesa, the minimum is Sh50. Loan interest rates come in at 7.5 percent per month for each with repayment duration of 30 days. “If you borrow a loan of Sh5,000, you will be required to pay it back with an interest of Sh375. The total due comes to Sh5,375 within 30 days,” she says.

  1. Fuliza

According to Robert Ochieng, fuliza is essentially an overdraft facility. “It means that you are being rescued from pecuniary embarrassment as you plan to refund within a short time,” he says. “Despite the one-month limit, the more you delay payment, the higher the daily charges.” He explains that Fuliza charges 1 percent of the borrowed amount and is unchanged within two days. “If you go to a merchant and find yourself short of Sh200 or Sh500 shillings, subject to your limit, you may ‘fuliza’ knowing well that you can repay from your ‘petty cash savings’ at your home or office.

Eazzy Loans

These loans are given by Equity Bank. They are both short-term and long-term. For an Eazzy loan of Sh100,000, you will repay back at the end of the month a total of Sh107,133. For a three-month loan of Sh100,000, you will repay a total of Sh109,329 from monthly installments of Sh36,443. The amount available varies depending on how active your account is.


They have a processing fee of between Sh100 and Sh600 which is a one-time charge. “Their interest rate is 17 percent to 36 percent per annum which translates to 1.4 percent to 3 percent per month,” says Rhina. She explains that if you borrow a loan of Sh5,000 you will be required to pay an interest of Sh150 (3 percent x 5000) plus a processing fee of Sh600 which is usually deducted before receipt of the cash.


 They have a one-time processing fee of 9 percent-29 percent (Sh45 to Sh870) on 61-day loans that range from Sh500 to Sh20,000. Rhina says that for a 61-day loan of Sh5,000, the processing fee would be Sh1,450 (29 percent x 5000) bringing the total due amount to Sh 6,450.

Takeaway Tips 

 Always review the loan terms. Understand how much exactly you owe and when. Understand the interest rates and fees charged on various mobile loans. This will help you know what you are getting yourself into.

         Look out for the hidden fees to avoid surprises. A good example is a transaction fee to transfer the money to your wallet. Read the loan’s blueprint to make sure you know what to expect.

         Be intentional about what you want the loan for. Borrow for highly essential needs only. Plan ahead on how you will repay the loan after understanding its fees and rates.

         Scout out for the cheapest mobile loan available. There are more than 120 digital lenders that operate in Kenya. Some lenders charge as high as 15 percent per month.

          Plan your expenses for up to a month, so that taking mobile loans become necessary only during uncertain occurrences or emergencies.

         If your monthly budget has room for flexibility, avoid taking a fresh loan immediately after repaying. This will prevent you from falling into a borrowing spree where you are constantly borrowing to repay. It is essentially borrowing from Paul to pay Peter.