In a financial world that is increasingly open and subject to technological advancements, modern-day lending has been taken a notch higher with the creation of digital platforms that have made loan acquisition convenient in terms of speed. Mobile money services such as M-Pesa allow customers to deposit, borrow and transfer money. Digital lenders such as Tala and Okash have not been left behind, as they have set up shops in Kenya, offering quick loans usually processed within 24hrs or even less through mobile phone applications. They understand that time is money for individuals and small businesses and that with quick decision making and a slick customer experience they can win the business. With the Covid pandemic cutting down the availability of cash for individuals and capital for small businesses, borrowers are willing to risk higher debt for a quick turnaround to offset cash flow deficits.

The infiltration of the market by digital lenders has swarmed borrowers with higher interest rates, leading to mounting defaults and an increased number of defaulters listed with the Credit Reference Bureau (CRB).  Many consumers do not understand loan computation, only realizing the financial burden when the loan is due. In extreme circumstances, digital lenders have gone ahead to publicly shame debtors by calling friends, colleagues, and family, creating additional pressure to repay loans. Digital lenders have taken advantage of the absence of proper regulation to run businesses as they deem fit to the detriment of consumers.

Whilst it’s impossible to go back to the old bank-driven system which is time-consuming and excludes a given portion of the population, it is unfair for the citizenry to continuously pay for the financial experimentation of tech startups. There’s a need for a sound regulatory system that makes digital credit responsible. Enactment of laws that require digital lenders to submit product pricing to the Central Bank for approval before launching to lower interest rates and a further capping of non-performing loans to avoid an increase in the amount payable due to late payment would go a long way into creating relief for consumers. Additionally, having all digital lenders under one regulator who exercises oversight on the sector, licenses players will bring about order in a rather chaotic industry.

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