This archive report was first published on 4 December 2019.
According to a recent report by the CreditInfo Credit Referencing Bureau, mobile loan defaulters are more likely to default again on new loans compared to their traditional banking channel counterparts.
Despite being given opportunities to borrow after previous defaults, some debtors are still ending up with bad loans on new facilities, a character issue and largely a show of financial mismanagement, as noted by CreditInfo Chief Executive Officer Kamau Kunyiha.
Ironically, mobile lenders are open to contracting with loan defaulters, with the bad apples taking up more loans after a negative listing compared to their peers in brick and mortar borrowing.
Between November 2018 and April 2019, the number of mobile customers with a new loan after a prior default came in at 398,160, while traditional defaulters accounted for a lesser sum of 115,869 loans.
Meanwhile, banks accounted for 93% of all mobile loan issues over the review period, representing the industry's undisputed dominance in credit issuance.
The inability to recruit new borrowers has been attributed to the observed tapping of onetime bad debtors by lenders, even as they suffer burnt fingers from subsequent loan defaulting.
As such, lenders have chosen to award better-graded borrowers with higher loan amount averages, with the high predictive power of loan issuance having kicked in with the introduction of credit-risk pricing of potential borrowers.
Incidentally, older borrowers have proven to be the better and more mature debtors, taking up more loans in both volumes and size, while youth are exposed as the less prudent borrowers.
Of the 19.1 million issued loans in the period, valued at Ksh.112.2 billion, 4.5 million individuals represented the loan takers, with the balance of the issued credit going to 855 registered companies.
However, of the hundreds of digital lenders, only 15 mobile loan issuers shared their loan contracts with CRBs databases to uncover gaps in the credit reporting framework.
