How technology is changing the Kenyan lending landscape

From Left ,Rose Muchiri , Sofia Zab and Victor Kabutugwa.
From Left ,Rose Muchiri , Sofia Zab and Victor Kabutugwa. 

Technology has finally caught up with how borrowers access b finance. Several mobile and web-based apps have been rolled-out in the last two years, and they have become popular with borrowers. Kenyans are turning to these apps to grant them small and micro loans — banks, saccos, chamas and Shylocks are no longer their only options.

These mobile-based apps have features that are attractive to the general population: They allow you to borrow as little as Sh100 and up to Sh1 million. Interest rates are flexible and lower than banks, they range between seven to 15 per cent. No collateral is pledged and no paperwork is filed. Your loan limits and legibility to access bigger amounts is increased by a certain factor each time you repay a previous loan on time.
The processing fee for these apps is lower than banks’. And, most importantly, cash is sent instantly and directly to your mobile phone.

Popular mobile-based apps include Safaricom’s M-Shwari, KCB M-Pesa, Equity Bank’s Equitel, and Co-operative Bank’s M-Co-op. Stand-alone apps include Tala, (formerly Mkopo Rahisi), Saidia and Branch.
 “The majority of our customers think of us as a friend or partner, not a financial institution,” says Rose Muturi, Tala’s Country Manager for East Africa.

“Convenience and ease of use continue to be the mantle that defines the path we walk with all our customers. The fact that our customers can receive loans on their phones instantly, at any time of day and anywhere they are, with minimal documentation required means that we have the convenience that most financial institutions can’t match.” The current format of the Tala mobile-based app was released in May 2016. The previous version, Mkopo Rahisi, was launched in Kenya in 2014.

“We’ve had more than 1.3 million downloads to date,” says Ms Muturi. “Loans range from Sh1,000 to Sh50,000, tenor is between three to four weeks. We are currently disbursing Sh1 billion per month compared to Sh137 million during the same period last year — that’s more than 400,000 loans a month with an average of Sh2,500. Our default rate is eight per cent.” Sofia Zab, marketing director of mobile-based app Branch, underscores this. “As time goes by, I believe the industry will move towards plugging into more and more data-sources to build a financial identity for applicants in emerging markets such as Kenya,” she says.


Branch launched their app in March 2015. It has been downloaded close to one million times in Kenya since.

They have disbursed about $30 million (Sh3 billion) in Kenya.

Branch’s interest rate ranges from 13.6 per cent to 1.2 per cent once a borrower has reached a limit of $500 (Sh50,000).

The ugly side to mobile-based lending is that it’s building a culture of living off loans and accumulating bad debt.

As if that’s not enough, the borrower is constantly reminded of the availability of these services through daily texts and attractive offers on regular borrowing.

Apart from mobile-based apps, there are also web-based apps that allow users to apply for loans from the comfort of their computers.

One such app is PataMkopo. “PataMkopo is currently only web-based,” says Victor Kabutugwa, the Product Manager.


“We launched the app in December 2016 and it’s still in the pilot phase.” He explains how it works. “PataMkopo generates leads for banks. A borrower will get onto our website and specify the terms of a loan — the amount, interest rate and repayment period.

‘‘The app will also ask them to submit their personal information, including income per month. Once the form is completed, the application is submitted to the bank for consideration. The banks we partner with have a back-end version of the app. Each bank vets the application and decides whether to lend the borrower on the terms specified in the app, or whether to counter the offer with other terms.”

Local banks and micro-lending finance institutions using the app include KCB, Co-operative Bank, Equity Bank, Sidian Bank, Jamii Bora, and Credit Bank.  “Between 270 and 350 loan applications are made through the app weekly,” says Mr Kabutugwa. “The value of loans processed per week is between Sh5 million to Sh10 million.’’