Kenya locks out borrowers with multiple mobile loans

Standard Chartered Bank Kenya  will lock out borrowers with multiple digital loans from its mobile lending app that will be unveiled in the coming days.

StanChart chief executive Kariuki Ngari said the lender would not “overburden” borrowers with additional credit, citing elevated default rates in the mobile micro-lending segment.

“One of our cardinal rules in lending is that we will always be a responsible lender and we will not just go there (digital mobile lending segment) and just start lending,” Mr Ngari said in an interview.

“For example, we will not lend if somebody is taking the sixth loan to pay off the first or the fourth one. We are going to be very careful about it.”

StanChart has received approval from the Central Bank of Kenya (CBK) to venture into the digital micro-lending space.

The lender — controlled by UK’s Standard Chartered Group — will be joining its top-tier peers such as KCB (KCB-M-Pesa), Equity (Equitel), NCBA (M-Shwari), Co-op (M-Co-op Cash) and Absa Kenya (Timiza) when it rolls out instant low-value credit.

Banks have largely used micro-credit apps, popular with small traders and individuals with irregular income streams, to tap into the mass market due to convenience and relatively lower costs compared to brick-and-mortar expansion.

StanChart, however, insists it was not about to shift its focus from the middle- and high-income customers with mobile lending entry.

“We know where our strength is, it’s an area we understand and our clients connect with us. That’s an area we will continue doubling down to ensure we continue being relevant,” Mr Ngari said.

“Nobody leaves where they are strong and try to explore because you can find yourself not standing at all after that.”

CBK regulations limit the maximum amount per transaction via mobile phones at Sh150,000 while daily transactions and account balance are capped at Sh300,000, constraining mobile apps to micro-lending services.

Digital lenders largely use machine learning technologies that enable them to access data stored on the smartphones such as the repayment history of other mobile loans to determine the creditworthiness of a borrower.

“There’s a lot of history out there. The regulator is now coming to control that (digital mobile lending) sector, and that tells you there’s something that was not going well,” said Mr Ngari.