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Failure to repay mobile loans risks credit blacklisting across Kenya

NAIROBI (Xinhua) -- Some four months ago, Nairobi resident Joash Mutisya was in a financial crisis as he wanted to travel to his rural area to attend to an urgent matter but he had no money.

After unsuccessfully trying to borrow from his two friends, Mutisya turned to a mobile money app, where he borrowed 50 U.S. dollars, thanks to his frequent use of Mpesa, a mobile cash transfer service.

The money was 10 dollars more than what he needed and he was supposed to repay in a month with 10 percent interest.

But to date, Mutisya has not repaid the money and he has also borrowed from two other providers of the service without repaying.

"I will repay when I get money. It is only that money has become hard to come by because business is bad," Mutisya, who runs an accounts consultancy in Nairobi, told Xinhua recently.

His predicament mirrors that of hundreds of other Kenyans, who have borrowed from the dozens of mobile loan platforms in the country and failed to repay.

The citizens are living in debt after borrowing from the platforms that have made it easy to access loans.

There are some 50 mobile lending apps in Kenya, some run by banks and others are independent entities, and new entrants are still coming on board.

A majority of the platforms offer loans at a one-off rate of between seven percent and 14 percent.

They are popular among Kenyans because they readily dispense cash and one does not need collateral to borrow.

Banks have entered the business because the service operates outside the Central Bank interest rate capping of 4 percent above the current benchmark rate of 9 percent per annum.

"I have several loans, two dating back 10 months ago and as things stand, I may not repay them," said university student Mildred Aketch.

She has received several reminders to repay the loans but ignored them.

However, as she prepares to graduate this December, the commerce student fears that she may not get a job due to the loans.

"Two of the apps have informed me that my name was forwarded to the credit reference bureau (CRB) for blacklisting," she said.

To get a job especially in government or even apply for electricity or water connection, one needs a CRB certificate to show that they do not owe any loans or institution.

"I don’t know what I will do when that time comes, which can even be in five years since jobs are hard to come by and by that time, the loan would even have doubled because of the interest rate," she said.

Ernest Manuyo, a lecturer at Pioneer Institute in Nairobi, noted that a good number of those borrowing cash through the apps are low income earners or have no steady income like students or the unemployed. They cannot get loans from formal banks.

"The chances of them repaying especially if they have multiple loans is slim.

"This leaves them indebted," he said.

Sadly, a good number of the people take the loans for non-core reasons that include betting or buying alcohol.

"These apps are creating a society of people living in small debts.

"And the implications are huge for people like those looking for jobs at the national and county government," he said.

He noted that defaulting the loans is easier because of their virtual nature.

"There is no one to remind you to pay the loan physically.

"There are no threats of auction.

"The lack of push as it happens with banks make many people fail to pay," he said.

As at June, there were 500,000 people blacklisted with CRBs for as little as 5 dollars loan, up from 150,000 three years ago, with the number rising with the many apps providing loans.

Once blacklisted, one may not access a loan for up to seven years.



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