The debate on whether loan apps in Kenya are helpful or enslaving continues. In fact, some people have termed loan apps as modern-day shylocks.
The arguments do not matter much to those facing financial constraints. Most people borrow to meet their basic needs that their income cannot meet.
Recent reports from different groups including the Financial Sector Deepening (FSD) Digital and Lenders Association of Kenya (DLAK) warn Kenyans of rogue apps.
Are you using a fake loan app? Read on…
The Bill and Melinda Gates Foundation in association with the government and the FSD conducted a study on mobile lenders. The team produced the Digital Credit Audit report.
The study showed that by September 2018, the two main app stores, Google PlayStore and Apple’s App Store had 110 mobile loan apps.
According to the findings, 74 unique app developers had developed money lending apps.
By April 2019, 65 out of the 110 apps were no longer listed on the app stores. Instead, 43 new developers joined the stores and introduced 43 new apps.
The changes within just a few months raise many red flags.
The team found out that most of the digital lenders are neither SACCOs nor banks. The lenders are not accredited to any financial institution.
This means that if you save with the lender, your savings are not secured in any way. In addition, such lenders are not insured.
If established banks go down, what do you think of unregulated digital lenders?
If more than half of loan apps are pulled down in just 7 months, why should you consider borrowing money from loans apps in Kenya?
Ways to identify fake loan apps
If your income can meet your bills and emergencies, you may not think of a loan. Again if you can access an unsecured loan from a local bank, an instant loan may never cross your mind.
Unfortunately, this is not the case for millions of Kenyans. Many depend on loans to survive.
Banks have also turned to online lending after the stringent rules that the Banking Amendment Act 2016 introduced.
Hence, if you don’t land in the hands of private digital lenders, you will end up in Mshwari, KCB-Mpesa loan, Stawi loan app, Kopa Chapaa by Faulu, Timiza from Barclays, Eazzy loan from Equity or Co-op Cash.
You may not qualify for a loan from these apps. Your alternative is private or international lenders like Tala, Zenka, Branch, or Saida.
New names have also in the Kenyan market such as Berry Loan App, KopaKash, Okash, Tumiwa, Uwezo Kash and Pezesha among others.
How can you tell if you are just about to borrow money from a rogue digital lender?
1. High registration fee
According to the Digital Credit Audit report, rogue lenders charge anywhere between Ksh.200 to 400 as registration fee.
Of course, the lenders know by now that borrowers are looking for free apps. With the high number of apps in the stores, coming clean with the registration fee is not an option.
Look out for claims that the fee is for checking your CRB record or score. You will never see the evidence that they actually checked your score.
Actually, you may not have access to the app after sending your registration fee. Some begin malfunctioning immediately and deny a fresh registration with the same details.
2. Data access
Beware of the permissions you grant to any app including loan apps when installing. For instance, an app may request to read your exact GPS location, which is expected with loan apps.
However, why should you grant permission to your phone gallery or messages/SMS app? Some will not install until you grant access to your call logs or your device identity.
A genuine lender does not need such information. You never know how the app owners use such information in this age of cybercrimes.
Also Read: Top 5 Instant Loan Apps in Kenya
3. Mimicked names
We know about brands like Tala, Branch, Fuliza, and Coop Cash. As you search the app store, you will come across loan apps in Kenya with twisted names.
For instance, you may see Tala Kash, Fuliza Sasa, Tala Pewa Loans or Mkopo Branch Rahisi.
Such lenders target borrowers who are unaware of the right brand names of loan apps. Stay away from such apps.
4. Rewards or prizes for referrals
If you need to refer other borrowers to an app to gain points, rewards, or qualify for a higher amount, you are in the wrong hands.
Some fake apps will not even grant the first loan before you enlist other borrowers and earn enough points.
Your creditworthiness should be sufficient to qualify you for a loan from a genuine lender.
5. Minimal details asked
How easy is it to qualify for your first loan? Is the app promising a high amount even with a low credit score?
Lending online does not eliminate the need to verify the identity and creditworthiness of the borrower.
If the lender needs few personal details to issue loans, chances are they have obtained the information illegally. Else, the app may go down at any time after earning a high interest from you.
6. Fake physical address and contacts
Most borrowers do not bother to check the contacts and address of digital lenders until they run into trouble. Check this information first no matter how pressing your financial need is at all times.
If you cannot get through the phone numbers given at any time of the day, discontinue the service. A loan app should be accessible and functional 24/7 with a quick support team.
7. Negative reviews
Do not believe every promise that an online lender makes. Check other borrowers’ reviews on the app store.
If all you read are complaints, do not ignore and assume that your experience will be different. Check the lender’s response to the complaints as well.
8. Exorbitant interest rates
Even the best loan apps in Kenya charge higher interest rates than banks do. However, rogue apps go beyond the normal rates for apps.
Compare the interest rates from established brands first to determine the prevailing interest rate.
9. Sudden changes in terms
Have you ever used app, qualified for a certain amount but your limit went down after payment? Loan apps promise to increase your limit when you pay in full and on time.
If the terms change suddenly, you are probably dealing with crooks who cannot sustain their business.
They come up with excuses for penalizing defaulters or changing loan limits even with evidence of previous communication.
10. Frequent breakdown
Here is one more red flag for rogue loan apps. An app hangs when you are trying to request a loan or choose a longer repayment period.
The malfunction rarely comes before you repay for the first loan or send the mandatory registration fee.
If you can hardly complete a process without a dysfunction, you are most likely using a rogue app.
You will not miss the red flags if you do your homework. Do not take chances. Seek for information before you share your confidential data with unknown digital lenders