BY DAVID ONJILI
The true taste of the pudding is in the eating. George, a mobile phone repairer along Tom Mboya Street in Nairobi and a personal friend escorts me to a stall along the busy street to meet Wanjiru, a reserved business woman and a mother to a teenage girl who is also pursuing her degree at Jomo Kenyatta University of Agriculture and Technology (JKUAT). She may pass for as an ordinary jobless Nairobi dweller, yet she is a moneylender, a member of Nairobi’s secret club of millionaires.
I have with me a Huawei GR3 model mobile phone, which I want to use as security to acquire a soft loan of Sh6000. Being acquaintances with George, she warms up to us and as I hand her the phone and tell her how much, she tells me that it’s not commensurate to the phone I have. Wanjiru suggests that I can only get Sh3, 500 for the phone. A quick intervention by George softens her as she agrees to lend me Sh4, 500 which I should repay in two weeks at an interest of 20%. Failure to pay the loan will increase the interest to 30% in 30 days after which she will gain full ownership of the phone. The current market value of the Huawei GR3 phone is approximately Sh18 300, as she counts me the bank notes, Wanjiru issues me with a piece of paper to append my signature. She also takes my national identity card (ID) to get a photocopy.
I later realize the piece of paper is a signed contract that stipulates that I am allowing her full ownership and the right to sell my cell phone in case I do not pay her back in a month’s time. The photocopy of my ID and the phone details are used by her to ascertain that I voluntarily gave out the phone as security for this soft loan just in case I may want to claim that it was stolen from me.
Welcome to the dark flourishing world of shylocks. Even before we depart, a young lady, probably in gainful employment, arrives with a laptop. She looks timid but is welcomed and Wanjiru moves onto her next client.
Fake it till you make it. That’s the life of your regular Nairobi urbanite. Yet, most if not all Nairobians and Kenyans at large live from hand to mouth. To keep up with the fads of society, borrowing loans has been the norm. Many are robbing Peter to pay Paul. With the capping of bank interest rates, access to credit has been deeply limited and also banks are cheekily favoring to conduct business with the government at the expense of individuals (high risk). Thus more and more individuals are seeking means to get loans to sustain them, from mobile phone lending applications to shylocks.
However, the number of Kenyans being listed by the Credit Reference Bureau (CRB) and thus becoming ineligible for such loans by lenders like M-Shwari, Tala and Branch is huge. According to a 2016 statistical data from Transunion Credit Reference Bureau, 400,000 Kenyans were listed by CRB for debts of less than Sh500, 316,455 Kenyans out of 600,000 had been listed too for Sh100 or less by the bureau (CRB). This denies many deserving Kenyans access to funds as appreciated by Ronnie Osumba, the Youth Enterprise Development Fund boss at a seminar in Nairobi earlier this year. Mr Osumba said that the government will help to ensure that youth of ages 18 – 35 will be removed from the CRB list to allow them access the Youth Fund which he said they will be compelled to repay. This acknowledgement shows how many Kenyans are locked out and continue seeking money for business, personal expenses and even just to maintain their lifestyles.
One man’s meat, another’s poison
The gap between deserving Kenyans who are in need of money but cannot access is filled by the many shylocks that operate in various areas. From the workplace to the regular mama mboga, to those who have their shops open in various areas of Nairobi. There exist a group of Kenyans who risk their money to lend it to others seeking various forms of security and charging abnormal interest for it. It’s business. It is not philanthropy and therefore the notion that they are ‘thieves’ should neither be here nor there. It is just that they are not regulated. And that should be the concern.
Money lending is not a new phenomenon. Back in the days when you needed money all you had to do was seek it from a relative, colleague or friend who had the means. Yet, this put a strain on relationships in the event of failure to repay or for the simple fact that your financial woes would be public information, invading on personal privacy.
Then came the bank loans. The stringent rules remained annoying, if not punitive. You would be required to fill in a long form of several pages, produce copies of your last six months’ pay slip then be at the mercy of the bank for the loan’s approval. Sensing a loophole, SACCOs joined this bandwagon of offering loans to needy citizens. For SACCOs, depending on their formation and industry, you would need to have a fellow Sacco member to guarantee you the loan. But the insatiable need for quick loans during ‘emergencies’ has continued to push Kenyans to seek loans from other sources.
With this booming business, Mobile money loans came in, from M-Pesa, Equitel, Tala and Branch. Your credit history and frequency of using the respective company products by the respective moneylenders is all that determined your credit worthiness and loan limit. Still, Kenyans in need of instant cash now rely on shylocks where all that is needed is any form of asset and you have your cash instantly.
While the shylocks are mean especially in their assessment of the security you offer when seeking a loan, the expediency with which you get cash makes it attractive despite the exorbitant rates of interest charged. But their assessment of the value of your property is a direct indictment on your worthiness. Consider a 49 inch Sony Smart television worthy Sh55, 000 on the shelves being valued at Sh10, 000 take it or leave it.
A deeply thriving and profitable underworld
Benson Ocholla (not his real name) is a motor vehicle mechanic who works in one of the leading motor vehicle dealerships along Mombasa Road, on a good salary to support his polygamous lifestyle. While he operates un-officially, Benson runs a shylock where he at times even lends to his bosses amounts as high as Sh20, 000 monthly at 30% interest paid in 2 weeks.
His core clients however, are majorly the 25 casual workers the motor dealer has employed whom he lends a maximum of Sh3000 and is repaid every Saturday afternoon when they collect their wages at 30% interest. Yes, a 30% interest earned in seven days. How about that? He confides in me that these casuals are the backbone of his money lending business. While he sympathizes with a number of them whom he admits just take the loan to support their drinking habits, Benson says he cannot do anything about it.
He requires no collateral other than the fact that on Saturday when the casuals are being paid their wages he will be present to collect his dues. This is a business he started three years ago with an initial capital of Sh90, 000, which has since grown nearly Sh500, 000.
Benson’s greatest asset is that he lends within the company, since they’re all paid on the same day, it’s difficult to default. True, there are those who try to play truant by dodging him since they come from various departments but he says this is not very common. The only challenges are the staff on wages that he has to be there every Saturday to collect his dues or they may disappear with his cash. Benson puts a human face to his trade confiding that he once denied one employee a soft loan since he was almost borrowing more than his salary. He was convinced that the said man would end up not paying some day.
While he gleefully revels at his margins, he does have an interesting observation of the salaried colleagues. “A week after end month or the last week towards end month, most of them come for loans mostly not exceeding Sh5, 000 to be repaid in less than two weeks at 30% interest,” he says.
Many Nairobians, he says, cannot sustain themselves or even live within their means. Woe unto them if an emergency like medical or death befalls. The need for instant cash is just too ingrained and so his availability is a plus to his trade.
When the rubber hits the road
Elvis Rupia (not his real name) was a victim of the well-documented job losses that many Kenyans have and continue to suffer from. He worked as a supermarket supervisor with the now troubled Nakumatt Supermarket. Once he lost his job, life was never the same. A married man with two lovely daughters, the deeply sinking Kenyan economy hit hard. His savings were quickly depleted as he struggled to sustain his family. The wife’s income was not even enough and surely it put a strain on him with paying his house rent his biggest nightmare.
Rent, he bemoans, is key that you would rather be hungry but have a roof over you in Nairobi. With accumulated rent arrears, his landlord’s mercy waned. Threats of evictions compounded his misery and in one particular instance the landlord had promised to evict him and true to his word came to do so. It was the intervention of his friends that cooled the situation albeit for 48 hours.
Since a man’s got to do what a man’s got to do, Elvis painfully looked at some of his prized possessions like the 40inch flat screen TV set, the refrigerator and electric cooker and knew he had to sell them to pay his rent and other bills. Tomorrow would take care of itself. Upon approaching a shylock and inviting him to his house to evaluate his assets as he sought a loan of Sh30, 000. An emotional Elvis reminisces how felt like a knife had gone through the heart after the shylock valued all this assets at Kh14, 000. He was tongue-tied yet he had no option. No bank loans, no more assistance from friends and relatives, no mobile money loans yet he had a family to take care of.
He painfully relinquished his assets for 40% interest paid after 30 days to get the Sh14, 000 loan. He had never felt so low and worthless seeing assets he had bought with pride and joy being carried in a pick up at a throw away price and into the custody of the shylock. He paid his Sh8, 000 rent and used the balance for the family needs. A month later, he did not have the Sh19, 600, Sh5, 600 being accrued interest on the principal to repay. Despite securing a casual labourer’s job in industrial area, he had only managed to save Sh10, 000. He paid and renegotiated the repayment but 2 months later, he had to lose his electrical cooker and refrigerator and managed to get his television set back but after paying close to Sh30, 000 in renegotiated settlements. The greatest pain was the shylock’s bravado and disinterest when handling him. You can never beat them to it since they maintain the police on their payroll to ensure that only the customer hangs on the smaller end of the stick.
Elvis’ story is not new or rare in the Nairobi. Individuals are using their cars to secure emergency loans and losing them. This is the world and life of many Kenyans especially the so-called middleclass live. While the money is readily available, repaying often times brings many battles and even life threats.
While a blanket condemnation of the shylocks is totally unfair, it cannot also escape the fact that a number of them by design or default handle stolen property. Reliable estate gossip points out both Kayole and Umoja estates in Embakasi areas to be the hub of such stolen goods, which end up with these shylocks. Flat screen television sets are said to be the prime target as a flat screen that is 32 inches and above would fetch you an easy Sh10, 000 from the shylocks that have shops that resell them as second hand goods. While you cannot put a specific hand to a particular shylock, a number of them are engaged in the vice of purchasing and selling stolen items.
What does the law say?
The Statute of Frauds refers to a legal concept requiring that certain types of contracts be executed in writing. When a shylock gives you cash for the exchange of goods, performance has occurred and the contract is binding. What many borrowers fail to do is read through the fine details of what they sign. It is understandable. You are desperate and in need of cash so is it even realistic that anyone will look at the fine print of the so called contract?The Kenya Law of Contract also agrees that any debt must be in writing to be enforceable and Chapter 23(2) provides that ‘no contact in writing shall be void or unenforceable by reason only that it is not under seal.’ The signed written agreement remains valid. By relinquishing your goods as a consideration and accepting the offer of cash from the shylock and finally signing the paper they offer, you have entered into a contract. This is an aspect many do not give credence to, it haunts when you lose your hard earned property but there are no two ways about it and it is what these shylocks prey on.
Kenya remains a country where there is much legislation with little enforcement. As long as the CRB continues listing individuals and denying them a chance to access credit from formal financial institutions and as long as banks have much red tape for those seeking loans, shylocks are, unfortunately, here to stay.