There has been a mobile loan app boom in the last 5 years in Kenya. A lot of lenders have popped up offering high interest short term loans to Kenyans.
The problem is that these loans are short term (as low as 15 days in some cases) and have very high interest rates (high as 480% per year). The combination of that means that they result to extreme ways to get their money back.
The Ajua Customer Loyalty Industry Benchmark was released recently and it seeks to show the customer experience in various industries. They had 1000 respondents from 9 different industries. One of the industries is Mobile Money lenders and the results are not surprising.
According to Ajua, 50% of loans issued in Kenya are mobile loans and in the last two years, the number has doubled. However, the biggest challenges faced by kenyans are the high interest rates, lack of information and breach of privacy.
The last part is pretty spectacular. According to the report, people increasilngly reported experiencing hostile treatment when asked to pay back their loanes. Some lenders resort to accessing their contact list to access contacts to push the loanee to clear the debt. This act many customers feel like a breach of privacy.
“These aggressive methods od debt recovery are both ineffective and unsustainable for lenders,” the report said. “Such tactics lead to a high churn rate and loss of revenue in the process.”
The report showed that most mobile money loan apps recorded a decrease in customer loyalty in Q4 2019.
Out of the 4 lending platforms they featured (Mshwari, KCB MPESA, Tala and Branch), Mshwari had the best customer experience. This is due to their lower interest rates, easily accessible loans and efficiency in loan disbursement.
KCB MPESA was second and was recmmended for its lower interest rates, easy accesibility and faster growth of loan limits.
Tala was recommended for its reasonable interest rates and repayment rperiods but people didn’t like the harsh penalties and high interest rates upon defaulting.
Branch dropped points due to its high interest rates and harrasment of defaulters. However people recognized them for their easy access to loans and faster growth in loan limits.
When Ajua asked Kenyans wheat they considered the most important when choosing a money lender they cited a few things. These are interest rates, repayment duration and dignified treatment of customers. The report advises these loan companies to improve their customer experience, stay competitive and be compliant with the Data Act of 2019.
Google has also tried to regulate these loan apps on the PlayStore. They released guidelines that loan apps should abide to or risk being removed. These apps have since “complied” in a way, but it is still not effective. It is now upto the regulator and the Parliament to come up with ways to regulate these apps.