In William Shakespeare’s 1596 play, The Merchant of Venice, a noticeable character is Shylock, a Jewish moneylender who used to charge exorbitant interest on loans. He has little love for Antonio, who lends money interest-free.
When Antonio, whose argosies are stuck in the sea runs out of money and his friend Bassanio wants to woo a rich heiress (Portia), goes to Shylock to ask for a loan, Shylock agrees to lend him money on one condition – default will lead to Shylock extracting a pound of flesh from Antonio.
The word Shylock has found its space in Kenya and it draws heavily from the Shakespearean character. Walking around Odeon Cinema in Nairobi, you can’t miss the signposts: Instant Loans on Household Items. Here, you submit an electrical appliance for a loan and then sign a contract. Breaching the contract means you lose the item and you cannot claim it once the repayment deadline has passed.
Shylocks, who are basically loan sharks, bank on the sanctity of a contract law that a borrower signs. These contracts are worded to act as a snare to the borrowers who usually misinterpret them. Most end up failing to meet the deadline and their items get auctioned. The popularity of Shylock dens in Nairobi is usually fuelled by lengthy and tiring procedures in obtaining loan from mainstream financial institutions.
“I’ve been in Shylocking business for three years now and it’s thriving because people want instant cash and the prolonged bank processes make Kenyans avoid the financial institutions,” says Mr Peter Marimba who operates at Odeon Cinema in the capital Nairobi. “We give you cash against a product, preferably an electrical appliance. By looking at the item, I can tell the amount it will fetch in the market if one fails to comply with the contract.”
This acts as security, often for a shorter period typically seven days. “If don’t repay the loan with the interest we can either negotiate you pay the interest first and I keep the item as you continue looking for money or I sell it,” says Mr Marimba, who requested we don’t publish his real name. Risky venture Shylocking is not a bed of roses.
Sometimes the sharks have to deal with stolen items and this makes them prone to being sued in case they are caught. Besides, they may be given faulty items and end up losing money since they cannot resell them.
While talking to Peter, a guy who looks drunk arrives and asks him for a Ksh500 loan. Taking his Nokia Lumia phone, Marimba takes his contract note book and after scribbling something he counterchecks the phone and gives him the money. With a repayment period of seven days, the borrower is supposed to bring back Ksh650, a 30% interest. “That’s how we survive and we barely make losses,” he chuckles adding that he once gave someone Ksh50,000 as a loan.
Mr Steve Ekwaro, an accountant with a city-based SME, is a frequent visitor to Peter’s shop. He says that when he has a pressing need, he turns to the Shylocks because they are the last option and getting money from them is easy. “Sometimes you find yourself in a fix; there is a pressing need and with a budgeted salary you have to turn to the Shylocks to meet this emergent need,” says Mr Ekwaro. “When you know there is a place you can get easy cash, you become addicted to it. Although the interest is high and the initiative makes people lazy, you are left with no choice.”
Mr Ekwaro was introduced to the Shylocking business in 2011 by his uncle and he has created a rapport with the sharks since he is a regular borrower. “When you become a regular customer you create a mutual understanding with the lender and he may decide to scrap off some money when you don’t default.”
Because they are unregulated, Shylocks take advantage of gullible Kenyans and weave the contract in a way that sets the borrower to default so that they can sell the mortgaged item at a higher price than the loan. This is how they thrive.
“The government should legalise shylocking in Kenya because our aim is to help a needy Kenyan at a fee. There is need to draft laws that can regulate the business so that we can start competing with the banks,” says Marimba. “Our job is similar to what banks do.”
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