Digital lenders cut loans after Uhuru's CRB listing order

Digital lending platform borrowers are being starved of cash after President Uhuru Kenyatta's waiver on listing of borrowers with credit less than Sh5 million.

The Digital Lenders Association of Kenya (DLAK) yesterday said they have stopped taking on board new borrowers to lower the risk due to lack of credit history.

A survey by DLAK shows the loan book for its 25 members has shrunk by almost 60 per cent to Sh1.5 billion per month from Sh4 billion .

"We are now only lending to returning borrowers with good repayment profile. Currently, we are lending to only two million people per month compared to a high of four million before October 20,'' DLAK chair Kevin Mutiso said. 

He said the sector has experienced strategic defaults in the last weeks following the announcement, pointing to the growing bad loan book in the country. 

Data by Metropol shows that the number of loans accounts in arrears for more than 90 days jumped to 14.36 million by January this year, up from 9,673,258 in August 2020, a 45 per cent increase, after the Central Bank of Kenya (CBK) lifted a three-month moratorium.

Mutiso complained that erratic policy measures by the political class in  government meant to appease population ahead of the upcoming general election is frightening investors and has long term negative effects on the economy.

He said lack of access to credit history is locking many qualified borrowers from accessing needed facilities to expand businesses or cater for emergencies. 

According to the  survey that sampled 1,000 people, digital lenders are the most preferred source of credit for many people in the country at 67 per cent.

At least 22.1 per cent seek loans from friends and family while the rest go to commercial banks and other lending platforms like Saccos. 

The survey further shows that a huge number of digital borrowers cite business investment as purpose of borrowing at 55.5 per cent while 24.8 per cent use the facility to settle unexpected family expenses.

The other 13 per cent use the loan to pay school fees while the rest borrow to buy food, entertainment and refurbishing houses. 

Digital lenders have a logarithm that lock out those seeking credit to bet. 

Last week, leading mobile phone network provider Safaricom revealed that a huge part of its daily Sh1.34 billion loan book went to betting. 

The study further shows at least 65.5 per cent of payday borrowers repay on time, with 82 per cent of those sampled saying they will continue seeking credit from digital lenders. 

Out of the 30 per cent who reported having deferred payment in the tree months of the study to October, 48.7 per cent said business did not go well , 24.5 per cent forgot to repay while 12.3 per cent attributed it to job loss. 

The study by DLAK is coming at the time the country is also waiting on President Uhuru Kenyatta to act on the the Central Bank of Kenya (Amendment) Bill, 2021 that seek to regulate digital lenders. 

According to Mutiso, his members are waiting on the regulations to increase investment and grow the market, including introduction of insurance and money saving options. 

The study shows that 22 per cent of borrowers are willing to save if they receive abrupt funds. Embedded finance is the future. Through this, DLAK is expected to encourage the saving culture and increase insurance penetration,'' Mutiso said.  

 


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