Taming Digital Lenders in Kenya: Are We Close?

Dr Patrick Njoroge, CBK Governor Photo|The Standard

As app developers in Kenya, we do not just create loans apps. We care about the experience and welfare of the users. Like many Kenyans, we are concerned about the rates the digital lenders charge.

Kenyans have been complaining about instant loan apps for quite a while. However, a suicide case in 2019 caused a stir.

A man borrowed from a digital lender and defaulted on his loan. The lender resulted in what many have termed as “harassment.”

We told you how lenders ask for access to private data such as contacts or phone gallery. Here is the purpose. The lenders will contact everyone on your phonebook if they cannot recover funds from you.

Such was the predicament of this man who resulted in suicide. The lender started sending messages to his contacts, including his mother and grandmother.

What would you do if all your friends and family members start receiving messages about a loan you cannot pay?

Some have termed this as cyber shaming. The suicide provoked CBK to move to action.

Borrowers, on the other hand, started sharing their horrific stories of the means that digital lenders use to demand their loans.

The digital lenders’ side of the story

Every time Kenyans talk about interest rates on mobile loans, the digital lenders come out to defend their case.

Is this a case of misinformation? Do borrowers know how the process works?

In a recent interview on Citizen TV, the Digital Lenders’ Association spokesman, Kevin Mutiso explained how they end up with high interest rates.

Some will call it exorbitant but the lenders call it fair pricing.

Digital lenders in Kenya access funds from banks and other financiers. At the moment, the lenders in the Kenyan market cannot get funds from local banks.

The result has been borrowing money from venture capitalists from the US, China, Poland, and other countries.   

The lenders talk of a high cost of borrowing the funds. The capitalists charge between 18% and 22 % as an interest rate.

Think about it. Who pays for this interest rate? You! And every other Kenyan looking for a thousand or two from a loan app.

Remember we have not yet factored in other costs like developing a loan app, operational costs, taxes, and fixed costs. The lenders still have to make reasonable profits to stay in business above all costs.

When they add their price to the cost of borrowing, the instant loan becomes expensive.

Also Read: 10 Ways to Identify Fake Loan Apps in Kenya

Digital lenders also talk about the high risk of the business. With millions of Kenyans listed on CRB as defaulters, the lenders understand the risk in the market.

Loan apps lend to people that local banks will instantly turn away. When you hear or read that you can get a loan with a poor credit score, understand that you will pay a premium for that risk.

Again, not all digital lenders are predatory. Some are committed to helping small business owners grow their businesses.

Small business owners like mama mboga cannot wait for 30 to 45 days of a business cycle to buy new goods. They must go to the market almost every day to keep the business running.

Loan apps came in to cover this market segment.

Should the government regulate the market?

It is easy to shout and demand that the government steps in to regulate digital lenders. Borrowers would expect that interest rates would come down.

Digital lenders are open to government regulation. CBK can protect both lenders and borrowers by setting standards to govern their operations.

For instance, digital lenders should be required to be transparent about the price of their loan products. Honesty and ethical procedures in collecting funds from borrowers are equally important.

However, capping the interest rates would harm the market, as it is with any other market.

A loan is a commodity that is subject to demand and supply forces. At least the digital lenders view it that way.

From your basic economics class, you know that the price of any commodity goes up whenever the demand exceeds supply.

Unfortunately, this is the case in the Kenyan market for instant mobile loans.

We have a good example from the Kenyan government’s move to cap interest rates for local banks. The bank owners, in response, introduced digital lending platforms that operate as other private loan apps.

The interest rates are nearly the same. However, most local banks are ethical in their practices and are strict about controlling the risk of lending to defaulters.

The financial crisis of 2008-2009 is another perfect example of the long-term effects of government interference in a market.

The way forward

We clearly need order in the digital lending space.  The government through CBK should create rules and regulation for digital lenders in Kenya.

Whether we call it cyber shaming or harassment, dealing with defaulters must be ethical and fair. We do not need to lose another life because of a small loan.

While talking about lenders, we need to look at the real issues as Kenyans. What is pushing Kenyans to digital lenders?

Why are we willing to trade our private data for a loan of Ksh. 1,000?

Most people do not borrow for luxury but for basic needs. Unfortunately, the needs are recurrent and with no sustainable income, the inevitable happens.

Kenyans are desperate for an economic shift that will increase their real income to match the ever-increasing rate of inflation.

The income of the borrowers that loan apps target does not match with the cost of living, especially in the urban setting.

Hence, beyond asking the government for regulation, we need to demand systems and institutions that work for the citizens. Corruption is still a sad case in Kenya where people borrow to eat.

When the government fails to do its job well, the citizens suffer.

Finally, we need to make equal noise about savings as we do digital loans.

As app developers in Kenya, we have heard all manner of arguments and complaints about instant apps yet the demand for the same is still increasing.

However, noise about apps or platforms that help you save consistently is rare.

We need to cultivate the saving culture while we demand ethical and fair practices from lenders and accountability from the government.

Show us some Love:

9 Things to Prepare Before Requesting For a Quote from Mobile App Developers in Kenya

App developers receive bulk messages and emails every day with requests for quotes. When you read about a company that offers great app design services, the next question that comes to mind is the cost. Should you request for a quote immediately and then think of its functionality later? Our advice, prepare a list with the following 9 items before contacting mobile app developers in Kenya. You can negotiate a good deal when you know what will work for your business

1. Overall goal or objective

Why do need an app for your business? Are you simply keeping up with the latest trend or have a specific goal you intend to achieve? Setting SMART (Specific, Measurable, Attainable, Realistic, and Timely) goals applies to mobile app development. For instance, do you want to create a social network for your clients?

Competent app designers in Kenya will ask you for the overall goal or objective. Setting clear goals will help you prepare the other items on this list. In addition, you will compare your results after launching the app with your goals to measure its effectiveness. 

2. Core features

What should the app do? Every app developer will expect a straight answer to this question. Well, a good app should help users accomplish most of the tasks that relate to your core business. For instance, they can chat with your support team, order for products, access your business website, and rate your services among other functions. If you need a utility app or an innovative solution, the final product should have all the basic features for that function.

Do not give vague answers about the functionality. Otherwise, you will get a generic app with basic features. If you need an effective communication channel, define the communication features or functionalities needed. What kind of content can users share with the app?

3. Preferred platform

What mobile platform are you targeting with the app? Will it run on Android or iOS? The development process varies with the target platform. You may need to conduct a bit of research to determine the platform that your clients use.

If your target market is in Kenya, check survey results of the most popular platforms in the country. You can pick the leading platform for your app to reach the majority of your target users and then develop for other platforms after the launch.

4. Online and offline functionality

One downside of mobile apps is that they consume large amounts of mobile data. The target users will not always be online. Can the user access some functions while offline? The best mobile app developers in Kenya will advise you to build an app that is functional offline.

The app can notify the user when the internet connection is interrupted or when trying to reconnect. Users can also queue tasks that the app will automatically complete when the device is reconnected to the internet

5. Integration

Integrating the app with your website or internal system should not come as an afterthought. While comparing different developers, prioritize those that offer reliable integration services as well. Integration goes beyond other platforms such as your website or bulk SMS services. Muva Technologies offers payments integration in Kenya including Mpesa and Paypal integration. The advantage of integrating your app from the start is that users can complete a transaction or process directly from the app.

6. Timeline

When do you want to launch the app? Developers queue tasks based on their urgency. If you want the app completed as fast as possible, you may be required to pay more. You may be looking for the best deal but you do not want to wait in line forever. If the mobile apps development company in Kenya has enough internal developers, your app will be complete within your given deadline.

Communicate your expectations with the developer in terms of when you will review the app. The app should be completed before the launch date so that you can review and recommend any changes. The developer will need time to fix any issues with its functionality or add missing features.

7. Budget

How much do you want to spend on the app? You may want an app with multiple features and within a short period but your budget is limited. The items on this list will help any developer estimate the cost of building your app. App developers work around your budget to build the best app possible.

Do not be discouraged if the developer proposes that you eliminate some functions because of cost constraints. Remember that you can redesign and improve the functionality of the app after launching. Our recommendation is that you develop version 1 of the app with all major functions and a version 2 with additional features in the future.

8. Personal design

Mobile app developers in Kenya prefer to build apps and websites from scratch. However, if your budget is tight, you can develop a design internally and give it to the developer. You may get a reduced budget if the right tools are used to create the design. This works for companies with internal developers with basic app development skills. Feel free to ask if the developer can improve your current design and give you a better look.

One caution when using this approach is to avoid insisting on a design that does not work for the developer. While you have the final say on your app, your preferred design may be outdated. Choose trusted developers who are interested in the success of your business and not just the paycheck.

9. Required services after launching

You can easily agree on all services and processes that lead to a functional app. What do you do after the developer hands over the app to your team? Will you need further support or services? How will you update the content and features?

Most clients focus on getting a good app and ignore the processes after launching the app. You will need the help of the developer in the future to integrate new services or features as new mobile app trends emerge. In addition, effective marketing strategies are required after the launch to inform your target users about the new app. App developers may not be part of your marketing team but can offer a useful guide on how to launch and market the app after development.

It is okay to approach a developer with a basic idea of the app you need if you have little information on how mobile apps work. At Muva, you will get a list of questions with these and other factors that contribute to the cost estimate. However, developing your own list beforehand saves time and boosts your confidence when negotiating with different developers.

Show us some Love:

5 Tips to Increase Your Earnings From Your Mobile App

In a previous article, we looked at different ways through which you can make money from your mobile app. If you have already developed your app, you may be tempted to jump right into it and start earning. However, the reality is that not every app earns money. Some people apply the same money making strategies but fail to earn even half of their investment in developing the app.

If you are not earning from an app, chances are that you got something wrong in the development process. We always advise that you work the best iOS or Android app developers in Kenya to ensure that you get the app right from the beginning. However, if you already have the app or cannot afford to hire a designer, you can still earn from your app.

A few changes or updates on the app will get your target users’ attention. If you are earning little or nothing from your app, consider these tips before dismissing your app as ineffective.

1. Choose a catchy app name

Before launching into the world of app development, realize that the competitor is stiff. Millions of other developers are trying to earn from the same pool of mobile phone users. Users have no time to spend on app stores looking for your app. Chances are that they will move to the next best alternative after the first trial. Remember that the name is the first thing that potential users will see about your app.

Look for a catchy or attention-grabbing name for your app. Think about its function when drafting the name. Users should get a hint of its purpose immediately after reading or hearing the name. Right after choosing a name that describes or hints at its function, create a short and clear description of the purpose. Use the description to display your app on your preferred app stores.

2. Short and informative description

App stores give you space to describe your app after the name and brief description. Use that space wisely. If the name does not sell it or convince users about its benefit, the description should. Consider it as your chance to persuade mobile phone users to download, install, and keep the app installed on their devices.

The description should be informative but brief. Few people if any have time to read a full easy on the app features. The readers should read the main features before clicking on the “read more” button. Most app users do not read past the first few sentences. You strategy that works for most apps is to list the main features in point form. Potential users can skim through the list before making a quick decision.

3. Pick the right screenshots

Many people do not read the text in the description section until they see screenshots. Users can determine if the app is useful or not with just a glance. Remember that some of your target users have basic development skills. In addition, some have already downloaded alternative apps that proved ineffective.

You can combine text with the screenshots but ensure that the final image is not clumsy. The text should explain or name each feature on the screenshot. Remember that the app store will create a line up with the screenshots. Hence, ensure that the images have a flow from the main features or interface to other pages on the app.

4. Differentiate your app

How different is your app from the competitors’ app? Before launching your app, visit different stores for iOS and Android apps. Browse the category of your app and see what your competitors have already done. You may think you have a unique idea only to discover that another developer has already implemented it.

You can learn from your competitors but not copy everything you find. Differentiate your app with a unique and appealing design. Ensure that it functions as good as you describe it. Visit all the pages and sections and ensure that they are all functional. Remember that users will access on different devices with varying resolutions.

Development does not end with launching the app or attracting thousands of downloads. You must update the app continually to include new features and accommodate the latest technologies. Keep your users informed of the updates. Sometimes users forget an app until they are notified of an update.

5. Advertise

You got everything right from the design to the name, description, and functional pages. The next step is to make noise about the app. Mobile phone users need to know that your app exists. Remember your earnings depend on the number of users who click your ads, buy your products or services, or subscribe to additional features. The more people download the app the higher the chances of converting them into sales.

If you have a business website, encourage visitors to download the app for a better experience. Social media and email marketing can help get the word out at a low cost. If you have enough resources, consider the traditional advertisements such as radio, television or billboards. One promotional strategy that can attract hundreds of users is offering discounts on the subscription fee or items bought on the app.

Advertising goes hand in hand with a great design, offering solutions and constant updates. Some users may download the app for the discounts or out of curiosity. The functions on the app will them using the app. Hence, do not over-sell the app in your marketing campaigns or make false promises. Focus on solving problems or meeting your users’ needs. If the app meets their expectations and needs, you will have a constant flow of income from it.

Every business requires a strategy including making money through a mobile app. Do not compromise on your choice of an app developer to save the investment cost. Experienced developers know the best features and functionalities that will keep your users engaged. Remember you face stiff competition from developers around the world and hence the need to create a unique and functional app.

Show us some Love:

Kenyan Logistics Gains Huge as Sendy Closes $20 Million


The on-demand logistics space in Kenya is about to scale to a new height following Sendy’s announcement. The logistics start-up announced the successful series B round that raised $20 million. Atlantica Ventures led this round backed by Toyota Tsusho Corporation.

Atlantica Ventures is a venture capital fund with a focus on tech start-ups in Africa. The fund started in 2019 and is still new in the African logistics space. The Japanese automotive firm, Toyota provides capital funding to start-ups through its investment arm, Toyota Tsusho Corporation.

Other participants in the Series B round included Sunu Capital, Kepple Capital, Asia Africa Investment, and Vested World.  Sendy was officially in 2015 and has since expanded its operations from Kenya to Tanzania and Uganda.

Evanson Biwott, Meshack Alloys, Don Okoth, and Malaika Judd co-founded Sendy. Over 5,000 vehicles are already registered on its platform. Some of the major clients that Sendy serves include Safaricom, Unilever, and Maersk.

Business model

Sendy operates under an asset-free model that allows it to invest most of its capital funds in technology. Clients in need of delivery services connect with drivers via a mobile app or web platform. The rates vary depending on the type of courier and distance.

The logistics start-up focuses on helping entrepreneurs grow their business by offering fast, reliable, and affordable delivery services. With the rise of online businesses in Kenya, minimising delivery expenses is important to business owners. Kenyans have embraced e-commerce but delivery costs increase prices significantly.

With less than Ksh. 100, a business owner can deliver a product within Nairobi’s CBD via a runner courier. Sendy offers the alternative of express bikes for small packages at a base price of Ksh.280. Pickups and vans are available for medium loads and trucks in different sizes for big loads.

Sendy has tried to cover all types and sizes of businesses in the market. Another selling point is its insurance cover on products in transit. African business owners know the risks involved in transporting goods, especially across borders.

The first step for new clients is to create an account on the Sendy app or web solution. The client will then choose a pickup and destination for the item(s) that needs delivery. The app automatically gives an estimated cost based on the chosen courier services.

Clients can track the designated driver in real-time until the goods arrive at the destination. Sendy boasts of an efficient customer service that is ready to serve clients in case of issues with delivery. The company delivery anything from farm produce to furniture, clothes, parcels, and food.

Competition

Sendy’s major competitors in the Kenyan market are Nigeria-based Kobo360 and Lori systems. Both companies have raised significant amounts through venture capital to expand their operations. In 2019, Kobo360 raised $20 million in its Series A round. Goldman Sachs was the major investor in that round.

Lori systems closed $30 million in the same year. Kobo officially launched its operations in Kenya in 2019, having established a strong presence in Nigeria and Ghana. Sendy has already established its presence in the Kenyan market.

The major challenge now is to keep its client base in the presence of the new entrants. The logistics space is huge but risky. Expansion to different markets, optimizing safety, and fast deliveries are necessary to win.

Sendy plans to stay ahead of its competitors by upgrading its technology. The current technology is already a step ahead but further investments in better technology will boost its competitiveness. Sendy faces other established competitors such as Glovo and small logistics firms, especially public transport companies.

Growth and expansion plans

Sendy remains committed to efficient deliveries and helping business owners to reduce their costs. The logistics company intends to deploy new talent to improve its services further. The talent includes engineering and data teams that will help in improving operational efficiency.

Sendy intends to optimize its trucks and set up service centers for its vehicles. The speed of delivery depends on the trucks, especially for heavy loads. Packed trucks are a common site on Kenyan roads majorly because of breakdowns.

The start-up may solve this issue for business owners with efficient trucks. The move is an opportunity for drivers who intend to join the network to invest in the best truck models.

Opportunities for Kenyans

$20 million is a good deal for a Kenyan company that has already established its brand in the market. What does it mean to Kenyans at a time when economic projections show tough times ahead? Let us break it down to you. How can you benefit from such an investment?

The obvious path that most Kenyans would follow is to apply for a job at Sendy. You may be lucky to get a good job as a data scientist or engineer if the company follows through its expansion plan. However, such opportunities are limited. You need to think beyond getting a job.

Some Kenyans are already ahead of the curve. We have witnessed foreign companies like Kobo360 and Glovo succeed in our market. Kenyans are establishing their own logistics solutions or apps that operate the same way as Sendy and its competitors.

Muva Technologies helps clients develop such mobile apps ideas further into income-earning ventures. Learn from Sendy. Four investors came together to establish a business that can raise $20 million from international venture capital funds.

If you start today, your business could be the next in line for such huge investments in the coming years. The initial investment is huge. You may need to work in partnership with like-minded people but start. Think beyond Kenya to other parts of Africa where business owners face the same challenges in delivering products.

Final remarks

The logistics space in Africa presents multiple opportunities for Kenyans to create solutions. E-commerce is expanding fast in the country. Kenyans need to wake up to these opportunities before foreign companies dominate all major markets.

Even with companies like Sendy in the market, the space is large enough for new entrants to provide better solutions. The successes of established logistics companies should act as pointers to entrepreneurs to existing business opportunities.

Show us some Love:

10 Ways to Identify Fake Loan Apps in Kenya

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…

Statistics

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.

See Also: Safaricom’s Fuliza Wins a Prestigious Award Months after Launch

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

Show us some Love: