Mobile-based loans uplift poor Kenyans

Majority of Kenyans have stopped seeking credit favours from shopkeepers to meet daily expenses, pay school fee, settle small debts and respond to emergencies as mobile bank accounts become more popular.

Small businesses that operate on tight budgets and have stretched earnings are also finding it easier to access instant credit as borrowing trends shift from physical banking halls that are seen as inconvenient because of long queues and high charges on interest rates.

Rise in cheaper smartphones has created a huge platform that has seen growth in development of innovative loan apps in the country. “I have managed to have a constant supply of goods to furnish my stock, now more people are coming for lunch and they do not miss food like before,” said Jennifer Daniel, who runs a small eatery along Rose Avenue in Nairobi.

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Daniel, 65 has borrowed more than 32 times via the Mkopo Rahisi —a mobile app that offers small loans against customers’ social media data. Geoffrey Mwangi, a Nakuru-based tomato farmer said mobile-based loans are flexible and cheaper. He has taken eight loan facilities to purchase pesticides and manage his agribusiness.

“The loan is convenient because of its one-week repayment duration,” said Mwangi. The minimum requirement to apply for an Mkopo Rahisi loan is an Android device and an active M-Pesa account.

About 42 per cent of the business loans taken via Mkopo Rahisi were used to increase stock or add supplies, 23 per cent for buying products to sell, five per cent for expanding an existing business while the remaining 30 per cent was used for other general business activities.

The platform offers collateral-free loans with interest rates ranging from five to 15 per cent per loan. “By showing good repayment behavior, borrowers can qualify for better rates over time,” said Inventure Kenya Business director Ronald Maira.

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Other instant credit apps in the market include Branch, which offers loans ranging from Sh1,000 to Sh50,000 payable in three equal weekly installments at an interest rate of 11 per cent and Saidia that has capped its loans at Sh600 at 10 per cent for a 30-day repayment period.

Mkopo Rahisi has no penalties, highlighting it anticipates significant rates of default, while branch and Saidia report defaulters to credit reference bureaus after five weeks. Mkopo Rahisi is restricted to M-Pesa account holders, while Branch loans to M-Pesa and Facebook users. Saidia on the other hand lends to both Safaricom and Airtel users.

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