US online lender stops Kenya service on low technology awareness

Kiva, a US-based company that issues small zero-interest loans, has stopped lending through its service that uses M-Pesa to distribute the funds.

Kiva, a non-profit organisation, said that it has stopped using the Kiva Zip service, an online platform that allows users to directly lend to Kenyan-based small businesses whose owners then access the funds through M-Pesa.

The problems arise from the low ability of many people seeking small loans to use the online services because they are “not digitally included.”

The targeted beneficiaries – mainly poor people – are in areas where access to online services faces perpetual interruptions and other difficulties.

“But the Kiva Zip Kenya programme has also experienced a growing number of operational challenges. Delays in both loan disbursal and repayment processing have kept borrowers waiting for loans, and lenders waiting on notification of repayment. Many trustees also hit logistical challenges that were discouraging their participation. Over time, we’ve seen the cumulative repayment rate decline as well,” said Kiva Zip senior director Jonny Price in a statement.

Trustees are responsible for vouching for businesses to get small loans, filling forms and debt collection. The loans were issued at a zero per cent interest rate to entrepreneurs in low income and remote areas.

The organisation says that the Kiva Service in Kenya will be viable but not at this time since most entrepreneurs in its target market are still not tech savvy enough to use the service.

“While we still believe direct lending holds great promise for Kiva, it’s become clear that for the Kiva direct model to be sustainable, borrowers themselves must be digitally included at a level that is currently not common for low-income borrowers in developing countries,” said Mr Price.

The Kiva Zip service was started in 2011 in the Kenyan and the US market and was meant to have users directly lend to businesses instead of loans going through intermediaries such as microfinance institutions.