NAIROBI (Xinhua) --
Joseph Kyalo runs a welding workshop in Katani,
south of the Kenya’s capital Nairobi, where he makes windows,
chairs, gates and doors, among other items, as ordered by customers.
With construction booming in the area, as other suburbs across the
capital Nairobi, Kyalo has never run short of work three years since
he started the business.
"Every week I must deliver an order or two and that has forced me
to employ two more people in my workshop to enable me handle
customers’ work efficiently," he recounted on Thursday.
However, despite not running short of work, as many other small
businesspersons in the east African nation, Kyalo often runs short
of cash to meet customers’ orders.
"The agreement is usually that one pays deposit of up to half the
cost of work then the rest upon completion.
"But the nature of my work is that you may need more cash to buy
paint or metal bars or welding grinders," he said.
Initially, Kyalo would worry when he ran short of cash, but not
anymore thanks to advent of mobile phone loans.
All he does is to go to his phone, open a mobile lending app,
borrow the money he wants, up to 50,000 shillings (490 U.S.
dollars), buy the materials he needs, complete the job, get paid and
return the loan.
The mobile phone loans are at the heart of Kyalo’s welding
business, and that of hundreds of others run by citizens in the east
From welding to carpentry, saloons, shop-keeping, vegetable
selling, construction material shops, butcheries, barbershops and
water vending, a majority of the businesses are now powered by the
mobile phone loans.
"I am entitled to take a loan of up to 290 dollars from one of
the apps because of my credit worthiness and the volumes of cash I
transact on my mobile money account.
This has helped me borrow regularly and thus stabilize my
business," said vegetable store operator Grace Mutuku, who is based
in Komarock, on the east of the capital.
Besides vegetables, Mutuku also sells cereals and household goods
that include sugar, bread, milk, soap and candies.
"Sometimes if I don’t have cash I borrow to pay suppliers of
things like bread or milk.
"I also regularly borrow to buy new stocks of vegetables, then
sell and repay. I have subscribed to three mobile phone loan apps.
"From all of them, I can borrow up to 686 dollars, but I have
never done it," she said.
There are more than 50 digital credit apps in the east African
nation that offer borrowers instant loans depending on their mobile
The minimum loans offered are 4.8 dollars while some, especially
those run by commercial banks lend up to 980 dollars.
Their interest rates stand at an average of 15 percent per month,
which is 2 percent higher than what the Central Bank of Kenya’s
prescribed 13 percent per annum that formal banks offer.
However, despite the higher rates, small businesses, a majority
of which suffer from cash flow challenges, love the loans because of
convenience and the faster access to them, which is instantaneous.
"I started a clothes business for my wife using a 29 dollars loan
I borrowed from one of the apps two month ago and today it has
"I have repaid the loan and she is running it herself," said
motorbike taxi operator David Kariuki, who operates on the east of
So popular are the loans that according to the 2017 FinAccess
Digital Credit Survey released early this year, 35 percent of Kenyan
phone owners are digital borrowers, an indication that over 6.1
million people borrow through the apps in the East African nation.
The number has increased certainly since the survey was released
as more mobile credit apps have joined the fray, word spreads among
Kenyans and the apps intensify advertisements on TV, social media
Two of the apps are currently running adverts on TV, newspapers
and radio in the east African nation and among the people they are
appealing to are small businesspersons, who cannot access bank loans
because the financial institutions consider them risky.
Ernest Manuyo, a business management lecturer at Pioneer
Institute in Nairobi, noted that the apps have become the saving
grace for small businesspersons, some who buy stocks every day for
"Despite the high interest rates, the fact that the businesses
can access the cash easily and when they want without collateral has
made the loans popular among traders," he said.