Loans are an avenue to explore if you are looking to get your hands on money to meet various needs. Institutions like banks or SMEs provide such channels for consumers to explore when in need but over time, the emergence of technology has enabled many entrepreneurs to dive in to capture on this market. I look at this as a viable business since it’s serving a need and it has a steady demand. In short, most of us Kenyans are living beyond our needs, not just Kenyans even Kenya itself is on the edge.

Technology has done its best; most social sites collect data, analyze and sell the same data to forums that tend to be beneficial to them. The little comments we make, the posts we like on Facebook, twitter, instagram is not all for free but crucial data that is sold to advertisers etc. For loaning institution this data is critical as they tend to clearly understand what trends on financial matters, what most users think of on matters finances. This information has guided most firms to come up with apps that offer the service. Others are still using the customer base to advance their business. One example is Safaricom; from a humble idea of Okoa jahazi came a super brilliant idea of M-Shwari.

Successful companies feed off the poor and one better area to cash in is through loans. I recently started a micro-finance where I give out small loans at an interest of 15%, arguably the lowest within my market players in this region. This opened me up to a number of clients and consumers of the same product. My concept in this line has been until pay day the rates apply, I don’t look at how long you would want to have the loan run. So a client will borrow cash on 20th and payday happens to be 25th, then in a cycle of less than a month I have made some profits.

On the other side there is digital borrowing, where we install apps which would come in handy whenever we need cash. To me these apps make us vulnerable when making decisions on day to day basis. For instance we can live off our income and make impulse purchases with an assurance of numerous financial options since from a marketer’s advert angle “ameji-back up”. I stopped giving small loans to individuals with financial Apps on their phones, since I know that 90 % of the amount will be to offset one of the loans. My understanding to this is that you cannot borrow yourselves out of financial trouble, the more you borrow, the more you dig your financial grave. So you have 100 Mshwari loans to be paid with an interest of 7 %, that’s 107, you get a loan of 107 from Tala to pay Mshwari which has an interest of say 10%, the payable amount becomes 110.7. Due to unknown terms you realize that 2.3 shillings is added as transactional charges so you need to pay 113. So you get to me or other apps for a 15% rate….. And the cycle is on, digging a financial grave. You then reach 30 years and get serious with life, you need a loan and at application you are told you are listed by CRB for a poor credit score…life sucks ha!

The older generation kept advising us that when the deal is sweet, someone has to think more than twice, you can’t have someone giving you money in seconds just like that, there has to be something tied to that cash, could be the threat to be sent to CRB even before the loan period ends. Digital lending platforms are currently in the Kenyan market making millions off unsuspecting poor Kenyans, we all need financial literacy as a country right from the government to Wanjiku. Let me leave the government for now but to the common man, I took the liberty to research on the status on digital borrowing in this country. An overwhelming 6.5 million Kenyans are digital borrowers. Over 3 million people in this demography do not even know the interest rates charged on these loans. This is insane! Most of my client would take 2 minutes to talk through the lending terms and then 1 hour to discuss this when repaying back. At lending no one cares to look at the details, as my seniors would put it, the devil is in the details.

I keep advising the youth generation that a loan can only be used on meeting the basic needs, that is physiological and safety needs. As you go up the Maslow hierarchy of needs theory, (psychological and self-fulfillment levels), never use a loan to meet this, you will die a frustrated Kenyan. Don’t take loans because its convenient, take them because you need to, read through the terms, possibly have hard copies the old school way, take days to research on validity period and terms before taking that crucial step on applying for one.
© John Milton Sabwa 2018