THE FINANCIAL SERVICES SECTOR CONFERENCE

[Pages:20]THE FINANCIAL SERVICES SECTOR CONFERENCE

THEME: "WIDENING ACCESS AND ENHANCING GROWTH"

Presentation:

"MOBILE LOAN APPLICATIONS : ARE THEY MODERN DAY SHYLOCKS?"

Raphael Lekolool JUNE 2019

Uphold public interest

Content

? INTRODUCTION ? MOBILE/DIGITAL LOAN STATUS ? OPERATING ENVIRONMENT ? SHYLOCK? WHY THE COMPARISON ? INITIATIVES TO REMOVE THE SHYLOCK TAG ? CONCLUSION

49 providers,,,,,, Mshwari by Safaricom KCB Mpesa Loans Tala Loans Branch Loans Saida Loans Okoa Stima Kopaa chapaa Zidisha loans Stawika Timiza from Barclays .........

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Mobile loan Description

? Mobile loans are part of " Digital Credit" which refers to credit products including digital products such as mobile money that are delivered fully via digital channels such as mobile phones and the internet.

? They refer to unsecured cash loans without involvement of a salesperson and use digital channels for loan disbursement and collection

? They leverage on digital data to make lending decisions. ? "CGAP research in Africa ,Asia and Latin America counts 22 deployments with estimated

24m subscribers" August 2017. currently in kenya over we have 49 providers and still counting.... ? Loans range from USD 1 to 300k . To start with low limits and increase progressively with use and good records and duration from 1 min to 12 months.

? VIDEO:

Digital Loan Status

? A report by Financial Sector Deepening (FSD)- Kenya on digital lending shows there are at least 49 online credit providers in the country. "They (digital lenders) have grown like mushrooms in the country and are not really working for Wanjiku," CBK Governor said.

? The mobile loan apps in Kenya are both a blessing and a curse to thousands of Kenyans, with the majority being the young and unemployed youth. Statistics show that more than 2.7 m Kenyans are negatively listed on the CRB, According to microsave. 80 percent of the borrowers being the youth who either delayed or failed to pay back their mobile loans.

? 83 per cent of Kenyan adults now have access to financial services compared to 75 per cent in 2016. According to the latest Financial Access Household Survey that attributes the increase in financial access to digital finance driven by mobile banking services.

? The main reason why these mobile loan apps are so daring in levying high-interest rates is that they are not regulated. Players in the financial sector are calling for the regulation of mobile loan apps to cushion the consumer. The Chief Executive Officer and Equity Bank Group Dr. James Mwangi was the latest from the banking sector who called for the regulation of the mobile loan apps before it is too late.(Soko Directory Team / November 8, 2018)

? These Fintechs are now taking advantage of cash strapped consumers who lack adequate information on lending rates offered by the platforms

Digital status

? The Market Overview of Mobile Loans in Kenya report by Credit Info showed that 74.5 per cent of the borrowers had between 2-6 mobile loans at any given time.

? Men of age 41-50 borrowed most, say the report. Only 34.5 per cent of loans were issued to women, with 31-40 age group leading the pack.

? Riding largely on the back of telco big data, small and micro loans are now only one click away. And it gets better; there is no need for collateral anymore to get a loan. Leading the pack is Commercial Bank of Africa's M-Shwari which recently registered its 10th million customer, Kenya Commercial Bank's (KCB) M-Pesa and Equity Bank's Equitel.

? With M-Shwari, a one-time fee of 7.5% is levied for each loan. ? The loan interest depends on the duration, starting at a minimum of 30 days. To qualify,

you need to be an M-Pesa subscriber of at least six months, save on M-Shwari and active adults (4.5 million) are active M-Shwari customers. ? The uptake and usage of M-Shwari in the past two years has been remarkable. There are over 10 million M-Shwari accounts and CBA disburses 50,000 loans every day. One-third of all active M-PESA users are also active M-Shwari customer actively use other Safaricom services such as voice or data.

Mobile loans.The legal landscape....

? "One of the biggest challenges the digital lending space is experiencing is the lacuna in regulation" ...They do not fall under the strict regulatory regime of the CBK ...,Business Daily 18th June

? "Money Lenders Act was repealed in 1984 and has not been replaced to regulate individuals, who provide credit service in addition it has not been replaced with any other act to regulate individuals who provide credit services in view of providing equity and equality for all Kenyans citizen as the provided by law." says LSK President Allen Gichuhi

? The Law Society of Kenya (LSK) through a petition to the National assembly, now wants all credit providers, including mobile loan providers placed under the in duplum rule, a move that will greatly reduce interest rates charged by the providers.

? "These provisions shall, for avoidance of doubt, apply equally to mortgage service providers and mobile lending," says the petition to Parliament.

? In the proposed changes to the Consumer Protection Act says that, "In all credit agreements, interest shall automatically stop to run when it equals the unpaid principal, and where the accrued interest or a part thereof is paid, it shall start to run again but only until it is again as high as the unpaid principal." The in duplum rule

Mobile loans.The legal landscape....

? According to The Business Daily, LSK petition to parliament requests that the change should be done through the Consumer Protection Act that will be applicable to all credit providers across the board.

? LSK says that the Consumer Protection Act does not completely protect consumers in regards to interest charged irrespective of consumer protection article as per the Constitution of Kenya.

? Gichuhi notes that Kenyans are suffering at the hands of unscrupulous lenders and shylocks who are charging high monthly interest rates at 5 per cent and above with no protection for innocent borrowers.

? Legal experts say shylock business has thrived on non existent laws and exploited loopholes in the statutes to make killing. Laws supposed to regulate the shylock business was repealed thus money lenders operate on the fringes of law since." they are exploiting a vacuum since the money lender Act which was regulating their operation was repealed and there is no ther legistlation in its place" Lawyer Lawrence Gikonyo.

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