Introduction
The rise of money lending has provided an option for many Kenyans to access fast loans without the complex procedures typically associated with traditional banks. While these services have proven beneficial in assisting most of us, especially in sorting out urgent needs like medical expenses and so on. However, certain unscrupulous mobile money lenders are causing distress to borrowers through phone calls and messages when payments are missed to say the least. Despite the Central Bank of Kenya’s (CBK) efforts to oversee lenders, numerous operators continue to function without regulation and resort to practices that coerce borrowers into repaying loans at excessively high interest rates.
Quick Overview
- Rogue mobile money lenders subject defaulting borrowers to a barrage of communication via calls and messages.
- Lack of regulation; Many lenders operate outside the legal framework engaging in dubious practices for loan recovery.
- Strategies: Tactics involve reaching out to contacts of borrowers imposing interest charges and employing aggressive debt collection techniques.
The Negative Aspects of Mobile Money Lending
Persistent Harassment and Privacy Intrusion
Individuals who fail to meet payment deadlines often face a barrage of text messages and numerous phone calls from lenders. These interactions can be forceful and invasive extending beyond the borrower by targeting their acquaintances well.
Sometimes lenders reach out to the borrowers loved ones, friends, or coworkers to try and pressurize the borrower into repaying the loan.
Questionable Practices, in Unregulated Settings
Dubious mobile money lenders operate without licenses or adherence to regulatory guidelines set by institutions like CBK. This lack of supervision allows them to carry out activities such as imposing high interest rates sometimes going beyond 50% per month. Moreover, some lenders have been found to misuse data of borrowers for purposes than recovering loans.
Real Life Examples
1. Johns Experience; John, a business owner borrowed money from a mobile money lender to restock his shop. When he faced difficulties in making repayments the lender bombarded him with messages and calls every day. The lender even sent messages to Johns family members threatening to reveal his default status to the community if he didn’t settle the debt.
2. Mary’s Account; Mary, a professional, took a loan from a lender, for medical expenses. After missing a payment deadline, she received intimidating messages from the lender warning her about consequences and imprisonment. The lender also got in touch with Mary’s employer causing her stress and embarrassment, at work.
Effect of CBK Regulations
CBK has implemented rules to oversee mobile money lending by mandating lenders to adhere to a set criteria when reminding borrowers to repay their loans. These requirements include obtaining necessary licenses, being transparent about loan terms and practicing debt collection methods. While these actions have resulted in the regulation of some lenders many still operate unlawfully.
Potential Consequences
The aggressive strategies employed by mobile money lenders present threats to borrowers’ mental health and overall wellbeing. Persistent harassment can lead to feelings of anxiety, stress and potentially result in depression. Moreover, these practices erode trust in the mobile money lending sector.
To safeguard citizens from predatory tactics, stricter enforcement of regulations is imperative. CBK should collaborate closely with other authorities to crackdown on lenders and ensure borrowers are treated justly and respectfully. Increasing awareness about these issues is also crucial for empowering borrowers to make choices and steer clear of lenders.