Kenyan security guard Ambrose Kilonzo took seconds and no collateral to get a loan from a mobile app. But when he defaulted, lenders called his boss, putting his job at risk.
This is an ordeal experienced by many in Kenya, where an increase in digital lending has seen thousands of people take on debt via high interest loans like the one taken by Kilonzo.
While apps promise money quickly and quietly to unbanked people, non-repayment usually results in public humiliation, with debt collectors calling the borrower’s friends, family, and even employers for the purpose of their payment. be ashamed of paying.
Kilonzo, who earns 23,000 Kenyan shillings (206,178 euros) a month, did not expect to put his job at risk for a loan of less than $ 30.
“It was like a recharge,” the 38-year-old man told AFP.
“The way it was packaged, it was so easy to get the money. It didn’t matter.”
With only 41% of the population having access to a bank account, according to 2019 data from the Central Bank of Kenya and the nonprofit financial organization FSD Kenya, digital lending has exploded in this African country. ballast.
Its rapid growth has been fueled by a vibrant tech sector that includes success stories like Mpesa, a mobile money service created by telecommunications giant Safaricom and used by more than half of Kenya’s 53 million people.
The country had just five digital lenders in 2015. Today, it is home to more than 100 apps, including Tala, backed by Silicon Valley, Okash and Opesa, which offer loans of up to $ 60 million per month.
But they are increasingly watched for predatory practices, including exorbitant interest rates of up to 400%.
They are best known for extracting data from borrowers’ phones and using it to shame those who haven’t paid.
– Hunger and humiliation –
When Patricia Kamene fell behind on her interest payments, her friends were hit by a barrage of calls from a debt collector.
Like Kamene, most of the users are often unaware that they have given their consent to app developers to access their contact database, call and SMS logs, Facebook friends list, email address, etc. ‘location and other information.
The 24-year-old single mother’s desperate need for money has led her to neglect the fine print after losing her job as a supermarket attendant during the coronavirus pandemic.
“When you are hungry and you have nothing yet, the applications will give you money, you take it without reading the conditions,” she told AFP.
But ease of access to funds comes at a price.
A middle-aged man committed suicide in November 2019 after non-payment of his debts prompted the lender to contact his mother, grandmother and aunt.
His wife told central bank officials that he couldn’t stand the humiliation.
– ‘Dishonest lenders’ –
As public anger grows, Digital Lenders Association of Kenya (DLAK) President Kevin Mutiso insists that such practices are limited to “dishonest lenders”.
“Our industry has matured very quickly,” he told AFP, stressing that the boom in demand had led many lenders to outsource debt collection to third parties who sometimes behaved in such a way. irresponsible.
âDLAK signed a code of conduct stating that none of our members should shame their customers,â Mutiso said, adding that they had campaigned against dishonest lenders and offered compensation to victims of harassment.
Regulators have struggled to keep pace, with the government passing a new law on Tuesday that allows the central bank to monitor all lenders, leaving open the possibility of a cap on interest rates offered by apps.
Central Bank Governor Patrick Njoroge has already sounded the alarm bells on the credit frenzy, warning parliament in July of risks to the global economy.
âThere is a bit of chaos in the borrowing and lending patterns where people are probably going to go to three or four lenders to borrow from one to pay off another and when they have problems, the whole process. collapses, âNjoroge said.
For Kilonzo, the agitation and humiliation are no longer worth it.
âI have returned to my banks and am trying to live within my means,â he said.
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