Mobile phone lenders' loan book hits half a trillion

 Central Bank of Kenya

The Central Bank of Kenya in Nairobi. FILE PHOTO | NMG

Digital lenders have disbursed over Sh500 billion in loans to small traders and low-income households in the last eight years, pointing to the proliferation of quick credit mobile apps in Kenya.

The loan book represents 13.6 percent of the total gross loans held by the banking sector as of December 2022.

The players say an estimated eight million Kenyans equivalent to a million customers every year have also applied for the mobile micro-loans for household spending or for working capital for their businesses.

About 70 percent of borrowers take funds for business reasons.

This comes at a time when the firms in the sector say delays in licensing have led to difficulties in attracting fresh funding from investors who are demanding the Central Bank of Kenya (CBK) certification before committing.

“We foresee demand for mobile credit rising as small local businesses turn to online marketing platforms and seek growth funds beyond borders,” said the Digital Financial Services Association of Kenya (Dfsak) chairman Kevin Mutiso during The Digital Finance Summit 2023 in Nairobi.

The Digital Lenders Association of Kenya (Dlak) rebranded to Dfsak in a bid to deepen financial inclusion by bringing together more players in the financial services ecosystem.

It is also expected to rack up more funding towards onward lending, and develop new digital financial services such as digital insurance, digital savings plan and digital investment platforms while overseeing licensing of more providers.

Digital lenders are now required to get a license from the CBK in order to be placed under Google Play, in new policies announced by the tech giant.

The regulator has licensed a mere 22 entities out of over 400 lenders.

Delays in the issuance of digital credit providers' licensing were largely attributed to the wide range of documentation required by the CBK including a list of directors and funding sources.

The licensing is expected to spur funding.

Mycredit Limited, for instance, at end of January, tapped into Sh325 million from Oiko Credit in a deal announced on February 1 with the proceeds expected to increase the lender’s medium-term lending programme to small and medium enterprises.

M-Kopa Loan Kenya sealed a Sh9.4 billion ($75 million) equity round in March last year with the injection bringing M-Kopa’s total equity funding to Sh23.8 billion ($190 million) to support the fintech’s expansion including adding to its hubs in Kenya, Uganda and Nigeria.

“In the next phase, the association is looking to overturn the shortfalls experienced in the last eight years including harmful debt collection practices still prevalent even as licensing continues,” he added.

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