I have been a CBA (now NCBA) Loop user for a while now. The product, which targets young people, and has an unquestionably one of the best mobile banking apps in Kenya is good but has limitations, such as its inability to accept cheques. The concern has been raised by a lot of users including yours truly, which made me take a walk to an NCBA branch in town for a new account.
While I do not love the idea of bunching several cards in my wallet because I’m an ordinary, struggling Kenyan who just needs access to basics, I was surprised to note some interesting things on the account’s application form. To begin with, financial institutions are asking for way too much personal details, which is not something that was not the case when I opened my first student’s account back in 2010. Secondly, and perhaps the most controversial concern was a slot for a Huduma Numba, which, technically, is not here yet. The new identification number, which has since been linked to widespread complaints for many reasons, was sold as a single identification system under the NIIMs database.
Who has opened a new NCBA account? Anyone see a slot for Huduma Number details? Wau.
— Cory Ellison Abuya (@coordenous) November 21, 2019
Of course, you are supposed to leave the space blank as advised by the bank agent, but you can bet that soon it will be mandatory to present the ID in future services, including those offered by the government unless something changes.
The not so big picture
Banks, among other financial organizations, gather credit information from basics such as customer accounts or by borrowing from sources such as CRB. However, banks being banks can’t lend to people who they have little to no information of. That’s, by definition, is where Huduma Numba came in.
Since most Kenyans are unbanked and those who have a formal bank account belong to informal financial institutions such as Chamas, to mention a few,
To this end, there is a huge market to tap, as shown by the numerous lending apps that the CBK wants to manage using a legal framework that does not currently exist for fintechs.
Huduma Numba is geared towards data mining information and use it towards lending, which you can bet forms the basis of Stawi that has since gone live.
Stawi is just a mobile money lending app just like the rest, regardless of the cheap 9% interest rate offered as detailed here.
But then, we understand that the interest rate will vary depending on the credit risk of each entity or individual. That makes a strange and bizarre scenario as to who would come up with such pricing. Remember that banks lend against customer deposits, which is just basic banking. So how then will these “cheap loans” be provided for in case of substantial default?
Of course, the government will cover these risks at the taxpayers’ expense. There will be a budget allocation for defaulters since all bad loans have to be provided for.
So, participating banks will reap profits while credit-risk borrowers will bear the pain of repaying disbursements at higher interest rates unlike those who are less risky. Remember that banks never jump in on anything unless they are getting a sweet deal out of it.
So, the common citizen is forced to juggle between being broke and miserable or being debt-trapped to “prosper” while the who is who reap big from the whole cycle.
Are we going to use Huduma Namba extensively? Mostly, yes. Are its offerings black and white for everybody? Of course not. But do you get the rough idea of why it exists? I hope so. Can something be done about it so that it is genuinely beneficial for the people? Your answer is as good as mine.