Ideas & Debate

Mobile money transfer platforms like M-Pesa have boosted financial inclusion among the unbanked. FILE PHOTO | NMG 

Do Kenyans have a nationally held view of borrowing? We know that there is a national fund-raising practice known as Harambee.

We know that Harambee is anchored in the communal practices of labour and child-rearing found in many of our traditional societies and there is no shortage of proverbs and folktales to justify giving money to people you do not directly know.

We also know that communal fund-raising takes to new technologies like a duck to water. In the 1970s and 1980s we were circulating printed Harambee cards in our offices and we even found biblical verses to legitimise these practices of communal giving everywhere, anywhere.

Today, look at the way digital media has fuelled the Harambee culture a thousand-fold! Indeed, for every 10 WhatsApp Groups that a person is subscribed to, there will be a Harambee for one thing or another on at least two out of those 10 groups, every week — funeral; medical fund; pre-wedding manenos!

But is there a class amongst whom borrowing is anathema? Do we have taboos over what one can’t possibly borrow money for, or are loans for any purpose, social, political and economic, allowed? You can borrow to marry, you can borrow to bury.

Are you still within the bounds of our social etiquette if you borrow to bribe, to bet, to run for political office? The Swahili say that kukopa harusi, kulipa matanga. Is this a strong enough deterrent against frivolous borrowing? What kind of borrowing does our society frown upon and by what social avenues do we publicly enforce that censure?

We do have popular sayings that caricature the scoundrel who borrows and flees. In the early 1990s Voice of Kenya (VoK) Salaam clubs were still considered nusu ya kuonana — a meeting ground for friends and strangers alike. The hippest shout-out then, to those who had been missing for a while, was, Lipeni madeni za wenyewe — pay up your debts!

In this digital age, what are the parallels to these practices of propagating financial responsibility? The introduction of M-Pesa 11 years ago had a major impact on Kenya’s economy, effectively boosting financial inclusion among the unbanked.

Today, Kenya has seen many lenders use the same technology to extend credit to millions of people. There are over 50 mobile microlending options.

M-Pesa partnered with Commercial Bank of Kenya (CBA) in 2012 to introduce a new savings and borrowing platform, M-Shwari. Today, at least one-third of all active M-Pesa users are active M-Shwari customers. The platform disburses up to 50,000 loans every day.

Today, more banks have come on board with similar products, including Equity Bank with Equitel, KCB M-Pesa, MCo-op Cash by Cooperative Bank and Barclays Bank’s Timiza. These lenders are not limited to financial institutions.


US-based Silicon Valley-backed fintech firms, such as Branch and Tala are tapping into the opportunities in our market. These platforms are easily accessible by USSD or as mobile apps. Repayments are also made on the platforms.

What cultures of borrowing have emerged within these new lending spaces? Can digital platforms breed honest borrowers? Microlenders do not ask for collateral. They use various parameters, including historical repayments, credit reference bureau (CRB) reports and social media accounts to generate a risk profile.

Microlenders have a loose regulatory regime. They do not collect any deposits from the public. They are registered by the Treasury, but they are entirely profit driven since they invest their own funds at risk. This freedom does enable them to price their products aggressively.

According to a survey by research firm Financial Sector Deepening (FSD), “Loans that are convenient, private and short-term in nature are meeting a demand for credit that other formal providers have not been able to satisfy.”

The FSD survey noted that 37 per cent of the money borrowed is for business and 35 per cent of borrowing meets day-to-day needs. Other uses are paying for education and according to Owino and Wa-Kyendo, “only three per cent of people that borrowed digital loans were reported to have borrowed for betting purposes.”

This latter figure may be significantly low because many microlenders do not lend to people who have betting apps on their phones.

Others do not lend between 2 a.m. and 5 a.m. as a way of curbing irresponsible borrowing defined as, to pay bar bills or to bet.

These microlenders are not being prudish or paternalistic, they know that such borrowers are simply bad business. But if a borrower is rational and determined enough to have two phones, and to borrow at 6 p.m., in advance of paying his bar bill at 2 a.m. and betting at 3 a.m. on the second phone, there is not much lenders can do to block him if these loans are repaid.

Not every person using microlenders online understands the cost of the easily accessible money. There are penalties for late payment. Worse still is the risk of being listed on CRB for delaying or forgetting to pay as little as Sh200.

In June 2018 Transunion CRB showed that 500,000 people had been blacklisted, up from 150,000 three years before. Twitter is rife with posts from borrowers who are shocked to realise that even after they have honoured their overdue payments, they remain blacklisted by CRBs for weeks on end.

Does the government have a role in protecting its citizens from easy loans? Nobody asks government to regulate credit cards to the middle class, or mortgages to the wealthy. Even though those can be predatory! The idea that only the poor need to be protected from debt is myopic and needlessly infantilising.

Since lenders do best when borrowers are able to repay and take another bigger loan, rather than when borrowers spiral into the ground, lenders would support collaborations with the government that lead to edifying regulation.

What if we devised a fraction of tax on profits to be used for civic financial education delivered by third parties? Teach, don’t ban.

Dr Nyairo and Mrs Muriungi-Mucheke run Santuri Media Limited.

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