Kelvin Ochieng sits on the edges of a sports apparel stall, off Suna Road Nairobi, sheltered from the striking sun beams on this unceremonious bright Monday afternoon deep into what is a rather wet season.
This is not Ocheing’s stall but rather his go-to-point to waylay potential customers ushering them into his very own second hand-clothes stall at the heart of Toi market, on the opposite divide.
Like so many other Kenyans, Ochieng has had a go at short-term credit, employing the service to rapidly replenish depleted stock reserves in a snap to ensure business continuity under overbearing cash-crunch challenges for his micro-enterprise.
He, like a section of other short-term credit users reads convenience and ease to the use of the short-term lending facility which ensures flexibility in managing his growing business.
Jane Karimi, another trader in the market has too sampled the fruits of this facility, taking in to an extent some of the gains but for the bitter taste in her mouth in the form of higher interest rates on the short-stretching credit.
A quick perusal of the terms to the lending option indicates interest of between one and 14 percent every month which is sometimes pegged to a daily amount with the issued loan building up from a low Ksh. 50 to an average Ksh.70, 000 over the scope of time.
While potential borrowers may be cognizant of the pumped up interest rates, it is the ease in the use of the facility that gets them in the end.
“There is factor we regard to as user experience in the adoption of technology. To get to some of these loans, it is sometimes as easy as saying yes with a click of a button, most times you don’t have to think twice about it,” said Abojani Investments founder Robert Ochieng.
The short-term credit facility has been pioneered largely by the entry of digital lenders in the domestic financial scene over the past years five years- mainly driven by the rapid expansion of mobile technology.
The lenders who now have to themselves an eight percent share of the market have taken the disruption to commercial banks to extend credit issuance to the unbanked keeping to themselves multiple gains in the form of interest payments and additional transactional costs and fees.
Traditional lenders have however not taken the changing dynamics laying down keeping up with the innovative trend to launch similar products to level the up the competition, posting up quite some remarkable results.
Barclays Bank for instance launched Timiza in March of 2018 advancing credit over a 30 day period to both its clientele and non-customers with the target of growing its customer base by one million new subscriptions each year.
The lender has in over nine months to December 2018 breached the customer targets estimates to post up three million new users in record time driving up the banks non-interest funded income by 13.8 percent to Ksh.9.1 billion in an year of profit growth.
KCB meanwhile did in December 2018 move to revamp its KCB-Mpesa platform to leverage on its mobile lending platform.
The bank further reported an 84 percent growth in mobile loans and advances in March this year having facilitated 62.1 million mobile transactions advancing Ksh.4.4 billion in total during the year of increased earnings.
Moreover, the bank partnered Commercial Bank Africa (CBA) and telco operator Safaricom in January to launch Fuliza- an overdraft service for Mpesa users on a shared revenue deal.
The product has in four months advanced a total of Ksh.45 billion accumulating a total of 8.8 million customers over the first quarter of the year.
The amounts advanced via the facility easily rival traditional banks primary loan books prompting lenders to twist rather than stick with norm.
“Banks have to tap into dual transformation defined in the ability to play in strong in the traditional business while at the same time exploring the future,” Mr. Ochieng added.
While the risk of credit default remains rife in the economy, the short-term lenders continue to rely greatly on the close study of consumer behaviour through algorithm based models to determine the customers’ ability and willingness to repay accumulated debt.
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