NAIROBI, (Xinhua) --
While chatting with friends on social media on
Wednesday, Ann Nyaboke saw a message pop up on the screen of her
She stopped the chat
and read the message, which was from a new digital credit app
asking her to enroll by downloading the software.
Not someone to fear
experimenting, she followed the steps offered and downloaded the
app and borrowed 1,000 Kenyan shillings (about 10 U.S. dollars),
the maximum she could get.
“I had not enrolled
in any digital loan app before, but I could not leave this
chance to pass out of curiosity because it popped into my
space,” she said. “It is the easiest money I have ever
Her experience is
shared by hundreds of other social media users in Kenya as
developers of the apps intensify their hunt for customers
through Facebook, Twitter and Instagram.
The digital loan
apps are mainly advertising on social media as they target the
youth in the east African nation, who form the bulk of those who
use the sites and borrow cash via the app.
“Apply for the first
loan of 500 shillings now! Get loan, make the back payment in
time and get another loan of up to 5,000 shillings,” one app
offers on social media.
“Instant loans to
your Mpesa account. Download our app today and borrow as low as
100 shillings to 50,000 shillings without any guarantors,
security or office visits!” another app says in an advertising
“Gone are the days
when customers applied for loans, which would months to process,
in the banking halls. Get the right mobile lender today. It’s a
digital world,” offers another digital loaner.
Kenya has more than
50 digital credit apps that offer borrowers instant loans
depending on their mobile money usage. A majority of the apps
are standalone products but commercial banks have lately joined
the foray to cash in on the boom.
The apps offer loans
at an interest rate of up to 15 percent per month, which is
outside the controlled Central Bank of Kenya lending rate of 13
percent per annum that formal banks offer.
So popular are the
digital credit apps that in the last months, banks and
non-banking actors have scrambled to launch new services, with
social media offering the easiest platform to advertise
Mathew Muthuri, a
social media marketer in Nairobi, notes that most of the apps
are exclusively using the sites to advertise their services
because of the huge reach and they enable them to target
newspapers or radio, which reaches to generally the mass market,
social media reaches millions at once but each person receives
the message individually on their phone at any time. It may even
be in the dead of the night. They are, therefore, likely to take
up the service without seeking opinion from anyone,” he said.
The 2017 FinAccess
Digital Credit Survey showed that 35 percent of Kenyan phone
owners are digital borrowers, an indication that some 6.1
million people use the apps in the East African nation.
These are mainly the
youth, who also are active users of social media sites.
Muthuri noted that
social media advertising has worked for the loan apps, the
reason why millions have enrolled for the service, some taking
loans from up to 10 service providers.
However, as the
popularity of the apps soar, Kenya’s financial sector regulators
have warned that increased usage of digital credit exposes the
economy to various challenges that include money laundering.
predisposes the economy to risks that include money laundering,
terrorist financing and technology risks,” said the Central
Bank, Capital Markets Authority, Insurance Regulatory Authority,
Sacco Regulatory Authority and Retirement Benefits Authority, in
a report released last month.