This archive report was first published on 17 May 2020.
With the Covid-19 pandemic causing economic havoc, loan apps have frozen lending activities, leaving many Kenyans in a vicious debt trap.
Abel, a shoe shiner, is one of the many Kenyans who have defaulted on their loans. He has just slammed the phone on an external debt collector hired by one of the digital mobile lenders to pursue a Sh5,000 loan.
"Not now. I’ll be depositing whatever I get and whenever,” Abel says, ending the call. He is willing to pay, but there's no money to spare due to the economic situation.
The digital apps have frozen giving loans, making it unlikely for Abel to pay and borrow back as he did pre-Covid-19. He is among many Kenyans who see the recent clamping down on digital apps by the Central Bank of Kenya (CBK) as a much-needed measure to save them from the debt trap.
CBK Governor Patrick Njoroge has been one of the biggest critics of the digital lenders, accusing them of rogue tactics. He recently laughed off their role in the credit market, branding them a “flea in the economy.”
Recently, the digital lenders reached out to the CBK for discussions on a regulatory framework that they would operate on. However, the Covid-19 pandemic has hit hard digital loan apps, and the majority have frozen lending activities.
Defaulters ignore their phone calls and texts, and most of the numbers used by the loan apps are labelled as “spam” in calling applications. However, defaulters are alarmed at how the apps are able to obtain their location and place of work.
Millions of Kenyans have knowingly and unknowingly surrendered their privacy, contacts, and location in exchange for the exorbitant mobile loans that have interests of up to 30 per cent.
