Defaulters Nation: Lack of discipline pushing Kenyans to debt

Most Kenyans who borrow money from mobile based lenders default due to lack of discipline. The proliferation of digital lenders has made it possible for Kenyans lacking bank accounts to access funds by touch of a button.

But not everyone is servicing their mobile loans. A report by Creditinfo, a provider of credit information, indicates that 70% default because they can.

“The default notion here is that not everyone who defaults is necessarily bad, a good majority of them it’s a character issue, it’s a discipline issue because once they default, they default on the other,” notes Kamau Kunyiha, Chief Executive Officer at Creditinfo.

The survey done between November 2018 to April 2019 covered 15 lenders, dishing out loans with a maximum limit of Ksh.50,000 repayable within 3 months.

50% of the mobile loans were issued to people between the ages of 31 to 50, while only 21% went to the young people aged 25 and below, indicating high rate of defaulters in the group.

90% of customers surveyed borrowed from 2 lenders; 23% had one loan while 19% borrowed from more than 7 loan apps during the period. Kunyiha notes that this is a familiar trend.

“More people are borrowing from one lender, there is good retention strategies coming through. My belief is that the banks are gonna start moving from this being just a product but becomes a channel for customers to access their services,” explains Kunyiha.

This will consequently lead to a review of the limits to move up as banks will have a good understanding of ones history.

Other notable findings from the survey show men have taken up 65% of the mobile loans taking an average of Ksh.6000 during the period under review, while women account for the rest with each taking Ksh.5000 on average.

Commercial banks still account for a huge percentage of the mobile loans at 93%, despite proliferation of current digital apps.

“They (Commercial banks) are the only ones who really have sufficient balance sheet to be able to grow the numbers. KCB Mshwari, etc,… the average is about 100,000 to 120,000 loans daily, I don’t think all the other non banks even if it is 30 of them combined can get to these numbers in a day,” explains Kunyiha.