Kenya’s mobile loan boom is increasingly being linked to financial exclusion rather than inclusion, according to a survey published on 20 November 2018. The findings point to rising defaults, repeated borrowing and a growing number of borrowers being shut out by credit reference bureaus.
The study says more than 500,000 Kenyans have now been blacklisted, up from 150,000 three years earlier. It also argues that over-borrowing and weak loan discipline have helped turn digital credit into a debt trap for many users.
Consultative Group to Assist the Poor, a donor-backed consortium affiliated to the World Bank, said 47 per cent of Kenyan borrowers made late payments while 12 per cent defaulted. The group said it reached those conclusions after analysing digital loan data and making thousands of phone calls across the country.
CGAP found that fewer than 40 per cent of borrowers used the money for business purposes. Some respondents admitted that they borrowed to gamble, including on online betting games, while the report also said people who take loans late at night are more likely to default.
The survey comes against a crowded lending market with more than 50 mobile loan providers operating in Kenya. Safaricom’s M-Shwari remains one of the biggest products in the sector, alongside lenders such as KCB-Mpesa, Tala, Branch, Saida, Haraka, Zidisha, Shika, Stawika and Barclays’ Timiza.
The report also echoes findings from Credit Info’s Market Overview of Mobile Loans in Kenya, which said the average Kenyan borrower had more than seven mobile loans at a time. That earlier review covered borrowing patterns between the third quarter of 2017 and the first quarter of 2018.
According to the Credit Info report, 16 per cent of Kenyans borrowed from multiple mobile lenders during that period, while 74.5 per cent had between two and six mobile loans at any given time. It said repetitive borrowing was common and that each borrower held around four mobile loans on average.
The survey also notes that borrowing for betting has worsened the problem, adding pressure to an already stretched market where digital credit is widely available but increasingly difficult for many users to manage.
