DLAK still defending pricey rates

Thursday, July 9th, 2020 00:00 |
Loan. Photo/Courtesy

 Steve Umidha @UmidhaSteve

Digital micro lending institutions have defended their pricing model amid criticism over exorbitant monthly interest rates slapped on their customers.

In a statement, the lending firms through the Digital Lenders Association of Kenya (DLAK) claim the model should not be likened with those of commercial banks.

“Digital lenders operate in a totally different environment compared to commercial banks making their models very independent and therefore pricing of their products cannot be compared,” said DLAK’s spokesperson Kevin Mutiso.

Unbanked Kenyans

The besieged sub-sector has seen the association come out  to defend its members – some of who are still struggling to redeem their torn reputation  owing to the fact that such platforms have struggled to convince investors that they are the future of small business lending.

Often times, this burgeoning space – initially envisioned to advance access to loans to the un-banked, has been faulted for charging inflated interest rates to unsuspecting borrowers, while others go an extra mile in their debt collection practices like public shaming and endless harassment to the borrower, something Mr. Mutiso says does not reflect the true picture of their dealings.

“For a loan amount of Sh 2,500 for instance, a mobile lender will get revenue of Sh 375 but the cost of issuing that credit facility is very costly,” he said.

Experts have continuously pointed out that customers were usually confused about loan terms and conditions, hindering fintech firms’ potential to advance financial inclusion.

Central Bank of Kenya governor Patrick Njoroge, has also criticised such platforms, saying in May last year that they were “displaying shylock-like behavior while hiding behind nice-looking applications.”

Talks to regulate the complex industry where over 19 million Kenyans mobile loan borrowers go for loans abound.

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