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Here’s why mobile loan Apps are not lending you money

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Back in April 2020, the Central Bank of Kenya (CBK) denied mobile loan apps from accessing and listing Kenyans information at the Credit reference Bureaus (CRBs), which in turn led to millions of Kenyans getting locked out of accessing loans.

The move came in the wake of mounting concern about the scale of predatory lending given the proliferation of startups offering online, collateral-free loans in Kenya.

Unlike traditional banks which require a paperwork-intensive process and collateral, digital lending apps dispense quick loans, often within minutes, and determine creditworthiness by scouring smartphone data including SMS, call logs, bank balance messages and bill payment receipts.

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It’s an offering that’s predictably gained traction among middle-class and lower income earners who typically found access to credit through traditional banks out of reach.

“We stopped lending in March through April and May (2020) but we had to make decisions so we wrote off all bad loans. We are currently only lending to the best customers, those who understand that they have to pay,” Digital Lenders Association of Kenya (DLAK) chairman Kevin Mutiso says.

With no CRBs and the economic state of many Kenyans due to the effects of the Coronavirus, they decided to stop repaying loans. “Most borrowers initially were borrowing with no intention to pay back.” Mutiso states.

Currently, the DLAK is pushing to have a bill passed in Parliament that will allow them to list defaulters with CRBs again, until then, the lenders are only giving out loans to a select number of Kenyans.

90pc of Kenyans listed with CRBs took loans via mobile apps

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