A Kenyan clutching a smartphone. CredoLab has launched in Kenya seeking to ‘drive financial inclusion’ by credit scoring more people. www.businesstoday.co.ke
A Kenyan clutching a smartphone. This article reveals some of the methods mobile lenders use to qualify Kenyans for loans [Photo/ BT]

More than 5 million mobile money users in Kenya have been duped by online scammers this year, a report by Financial Sector Deepening (FSD) Kenya has revealed.

 FSD’s report dubbed  Inclusive Finance? which  draws its observations from the Finaccess 2019 Household Survey jointly authored by the Central Bank of Kenya (CBK), the Kenya National Bureau of Statistics (KNBS) and FSD states that nearly 30% of all money mobile users in Kenya have been duped, experiencing loss of money through f***d mostly through hoax SMSs or phone calls.

It further reveals that while 80% of the scammed Kenyans have been able to retrieve their cash, a whooping 20% of the users were not able to recover their hard-earned money, a situation that is likely to turn the spotlight on telcos.

“Mobile money users had substantially more challenges than users of regulated financial services like banks and mobile banks,” reads the report.

The report lists security (loss of money/f***d), transparency and system downtime as the major challenges that Kenyans have encountered when using financial services this year.

Unexpected charges levied by banks and unclear terms stipulated by the lenders is listed as the second-largest challenge that Kenyans have faced while dealing with the financial institutions this year.

Service system downtime inefficiencies (e.g network downtime and ATM not working) is also listed as a major challenge that Kenyans have experienced this year with banks and mobile money service providers.

“While these incidences may not necessarily occur on a regular basis, the inability to get hold of the funds when needed creates high levels of anxiety and inconvenience for users which may at times lead to monetary cost like for instance when a drawer defaults on an important payment,” further reads the statement.

Read: How Banks are Playing with Your Money

Loan defaults
According to the report, shopkeepers have been the hardest hit by loan defaults leaving them in a precarious position since they themselves borrow from lenders in order to purchase their stock.

Forty-five percent of the surveyed Kenyans claimed to have defaulted on or paid late for goods sourced from shopkeepers this year.

Eighteen percent said they had defaulted on mobile bank loans, 13% on loans from friends and family, 9% on loans by mobile lenders while 2% claimed to have defaulted on bank loans. 

See also: Digital Lenders Hatch Plan to Block Serial Defaulters

“Taking goods on credit from shops is more prevalent among the poor with the main reason being ‘prioritising basic needs’ suggesting that these households are more prone to economic stress,” reads the report.

“This could point to a transition in Kenya’s credit landscape where consumer credit is encroaching on a previously informal borrowing space in which flexibility is the norm, and the clear-cut terms of formal contracts have yet to be internalised ,”

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