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By ANUP SINGH
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Recently, Central Bank of Kenya Governor Patrick Njoroge noted that the risks to Kenyans are a necessity for regulation in the booming digital credit sec-tor.
While many of these small digital credit loans are immensely valuable for people facing emergencies, managing cash flow problems or small scale trading, there are significant downsides that deserve attention.
I sympathize with his concerns about Kenya being "a guinea pig "for new technology by foreign companies. However, the three largest digital credit lenders (M-Shwari, EazzyLoan and KCB-M-PESA) are Kenyan entities.
It is fair to say that in Kenya, as in many other African countries, the development of digital credit
This was done with good intentions, with little foresight of the unintended consequences.
There is growing evidence that this is a worrying proportion of these credit risks that is used to treat the epidemic. Perhaps as a result, a recent study noted that borrowers are in the first cycle of borrowing (CRB).
By March 31, 2017, about 10 of the adult population of Kenya CRB – nearly a million of these less than Sh1,000.
More than a year later, the number of people negatively listed exceeds 3.5 mil-lion.
Many remain negatively listed because of the Sh2,200 required for a clearance certificate (CRB lists)
.
The effective interest rates for many more than those published by many of the lenders.
The typical month-long digital loan, with a fixed interest rate, is simply inappropriate for these borrowers.
Small wonder that 36 per cent of these loans are repaid within a week – and sad that these borrowers receive no interest rebate.
Clearly, there are many opportunities to re-engineer these loans.
Relatively small tweaks to the structure, marketing and pricing could increase transparency, reduce delinquency, help borrowers and increase
CBK could consider introducing and enforcing incentives for auto-submissions from bank to CRB to improve the accuracy of the data and credit bureau (2013) to incorporate a minimum loan amount for the listing.
CBK has already stressed (19659004) This would allow the future of CRB's database. 1965 to Sh Sh [[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[[
It should also consider the curbing of the aggressive, SMS-based push marketing that is so common
Anup Singh leads the banking and financial services domain for MicroSave.
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