Digital lending is on the rise in Kenya. It started about five years ago and has grown in leaps and bounds to see over forty companies join in to share the market stake. Tala and Branch are some of the household names in this sector but many more are steadily coming up.
"Since we launched 5 years ago, digital lending has now grown in tremendous speed," says Ivan Mboa, East Africa Growth,Tala. "When we fist came in it essentially was Mshwari that had come in first, simply followed by TALA, but now we are looking at 45, around, over 47 digital lenders."
More digital lending apps have seen the number skyrocket as the demand for credit by Kenyans continue to rise...and rise. It is estimated that about seven million Kenyans are currently accessing mobile loans out of the 46 million Kenyans who own mobile phones.
Zenka loan app is one such company. Founded just about six months ago, but has made inroads into the fin-tech market as explained by Robert Masinde, Zenka chief executive officer.
“What we have done is try to provide access to them (customers) in a way easy and user friendly without the intimidation that they have to go through when they have to get a bank loan,” says Masinde.
Zenka app also offers its first time borrowers interest-free loans. This means that those who borrow for the first time will pay back the exact amount borrowed.
“We are bringing people who otherwise would have been stuck in the periphery of financial inclusion and migrating them to a position where they can access fiancé in the formal sector by starting them at a level they can manage,” adds Masinde.
But there is a challenge posed by the rapid growth of the sector, catapulted by high demand and appetite for quick cash. Regulation is one such issue that stakeholders are grappling with, alongside transparency among practitioners in the sector. So, what will be the impact of regulating the sector?
"I must mention here that regulation is necessary to protect Wanjiku, to ensure consumer protection issues are addressed to ensure that the consumer is not exploited by service provider," says Habil Olaka, Kenya bankers association chairman.
But is the sector totally unregulated? Phyllis Kamau, an advocate of the High Court of Kenya who specializes in fin-tech and policy opines that there is self regulation in the sector.
"There is a lot of regulations that regulate mobile payment systems where this payment is happening," she says.
Adding that, "There are regulations around anti-money laundering that will by extension apply to those who are not licensed by any institution."
Digital lending has indeed taken the the country by storm. It is the new thing, here to stay as stakeholders admit that despite the challenges, it has bridged a wider gap that existed before.
“What digital lending has done is that it has improved financial inclusion in the latest fin-access survey by FSD Kenya, which reported an increase in financial inclusion,” says Phylis Kamau.
“It means that the people who have not been able to access banking services have now been brought into the formal borrowing industry,” she adds.
Beneficiaries also share their varied opinions about the new wave. Francis Kimani, a vegetable vendor in Nairobi's Ngara estate narrates the importance of mobile loans an how they have helped him boost his business.
"Long time ago, accessing loans from banks was a difficult task," says the 42-year-old. "But now small scale traders like us can access loans all thanks to mobile loans, the process is quite simple."
While most of them admit that mobile loans have helped them boost businesses, others are concerned about being listed a the Credit Reference Bureau (CRB).
"The way these lenders share details of those who owe them with the CRB is not good and they can share your details without your approval," says Edwin Asila, a borrower in Nairobi.
You can also watch The Chamwada Report show on this topic in the video embedded.