Hope as alternative lenders step up to educate borrowers

Mobile lending platforms can tie you up when not used wisely. Only credit literacy will put borrowers on the right path. It is important to demonstrate a commitment to responsible lending by providing tangible information and tools outside of providing credit line to advance financial health


Digital Lenders Association of Kenya (DLAK) is set to uplift the education of borrowers in a move aimed at addressing the aggressive nature of most her members.

The umbrella body of digital lenders in Kenya has partnered with Tala mobile lender to launch MoneyMarch, a financial literacy campaign whose focus is on building resilience in a period when banks are seemingly reluctant to sort out businesses and individuals with quick loans.

This is a 30-day event dedicated to bringing providers and consumers together in a conversation around financial health and wellness as Kenyans seek to rebuild their finances amid the pandemic economic fallout. Throughout the month, DLAK members will provide tangible information and tools to help consumers bounce back from the economic crisis and take charge of their finances.

Topics will include healthy borrowing habits, how to choose a responsible loan provider, consumer protection principles, data protection policies, financial planning to build resiliency, and strategies to help both families and businesses grow their finances.

“This financial literacy campaign is inspired by a report that was co-authored by Dr Patrick Njoroge, the CBK Governor, that encouraged financial sector to develop citizen centric strategies while harnessing digitization to finance a sustainable future,” said Kevin Mutiso, DLAK board chairman.

Online lenders welcome regulation, it is a sign that the industry is maturing in Kenya

Over the years, digital lenders have been operating like shylocks with issues of concern mainly touching on their predatory way of dong business. It is not a secret that most of the players charge borrowers pretty high interest rates, partly the reason why the regulator kicked them out of credit reference bureaus. But people abreast with the lending industry say the Central Bank of Kenya amendment Bill, 2020, which is now at the committee stage in Parliament, is expected to change the ball game. Should it become law, the greedy lot will soon follow rules just like commercial banks.

“The digital lending ecosystem is very resilient. We are designing products that are going to be relevant in a post Covid world. We had to adjust and adapt in 2020, now in 2021 things are looking up. A lot of our customers are accessing the limits they were accessing before. That’s why we started ‘money march’. We want to start teaching our customers how and when to use capital, what a loan is about and how to build resilience,” Mutiso said, adding that online lenders welcome regulation, and that it (regulation) is a sign that the industry is maturing in Kenya.

Ivan Mbowa, general manager, Tala, said mobile lending platforms can tie you up when not used wisely, adding that it is only credit literacy that will put borrowers on the right path. To him, it is important to demonstrate a commitment to responsible lending by providing tangible information and tools (outside of providing credit line) to advance financial health so that by the time the bill is passed they already know how things work.

“We believe that a borrower should be treated with respect throughout the entire life circle. Even if you are in default it doesn’t mean that you have lost your rights. That also means that you (referring to dramatic lenders) should not contact the whole phone contact list of a borrower,” said Mbowa.

Mobile loans are risk based, and lenders in that space are confident that only by standardizing (through regulations) will the risks be reduced. It is during the Covid-19 pandemic that it became clear that it is not easy to recover unsecured loans. People lost their jobs, some are on pay cuts, and businesses are on their knees.

“They are willing to pay but they have no way. Sometimes we waived interests. And the truth of the matter is that because we are not collateralised that is the risk we take. So the pricing that digital lenders have actually reflects the risks that we receive from our customers. We don’t charge customers the same rates because not all customers have the same risks. We have a range, band of charges. The pricing that digital lenders charge our customers is reflective of risks. I do think that there are future innovations that will enable us lower that,” said Mbowa.

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