These digital loan apps got Kenyans wagging their tongues for all the wrong and rights reasons. Folks are shunning away from the tedious bank procedures to secure a simple loan and would rather incur more charges with the digital loan app, thanks to their convenience and requirements.
Examining the other side of the coin, digital lenders are more exposed to risky borrowers and high default rates because the process of screening first-time borrowers cannot be verified on previous background information on them. To counter this factor, the umbrella Digital Lenders Association of Kenya (DLAK) have inked a code of conduct to cap initial lending at a maximum of Sh4,000 to customers with no borrowing history.
“It is not unusual to find rogue players emerging in such an infant industry. We are concerned with malpractices that have emerged. We can’t just wait for somebody to regulate us. We have to take the first step,” said Robert Masinde chairman of the newly formed lobby.
He argued that the digital lending landscape has become chaotic and disorderly due to free entry of many new players companies, forcing competitors to raise loan limits, a decision that hurts customers. Among the twelve digital lenders who signed up include Tala, Alternative Circle, Stawika Capital, Zenka Finance, MyCredit, Okolea, Lpesa, Kopacent, Four Kings Investment, Kuwazo Capital and Finance Plan.
“Where possible, lenders will attempt to help contactable customers to restructure their debt or otherwise make every reasonable effort to help their customers return to good standing,” reads the code in part.
The digital lenders also pledged to protect customer data and fully disclose pricing of their loans. For the customers, they will have access to in-app digital borrowing history and repayment behaviour accessible by all the accessed by all lobby members to determine the creditworthiness of customers. The lobby is now looking to woo other participants in the market to sign the code.