Connect with us

Business

Suicide that jolted CBK

Published

on

Spread the love by sharing this post with family and friends
  •  
  •  
  •  
  •  
  •  

It is death by suicide that jolted Kenya’s top financial regulator and sparked one of the most compelling moral conundrums for the fintech-fuelled digital lending craze in the country.

The shocking revelation by the Central Bank of Kenya (CBK) last week that a middle-aged man took his life after failing to withstand harassment and public shaming by an unnamed digital lending application, has ignited debate on the radical evolution of the many platforms that disburse loans via mobile phones.

“In November last year, a lady came to the Central Bank to explain to us that her husband had committed suicide after getting involved with one of these lenders,” she said.

CBK Deputy Governor Sheila M’Mbijjewe revealed the incident, which was reported to the regulator by the distressed family of the victim.

The aggressive nature with which online lending firms deploy to collect what they advanced has become so alarming that no less than the CBK wants new laws to stop cyber shaming by these cloud-based facilities.

“What this lender did is that when her husband was unable to pay the debt through the contact list of her husband, [the lender] started sending messages to all of them, including his mother, his grandmother and his aunt,” she said.

Days after the Central Bank deputy boss made the revelation, more Kenyans have come out publicly to tell of their harrowing experiences in the hands of digital lenders.

Many who sought anonymity for fear of being humiliated further likened the apps to modern day loan sharks, which can wreck people’s lives in case of default.

Loan sharks are criminals who charge extortionist interest rates and use callous methods to force people to pay the money back.

Victims who spoke to Smart Company said the harassment and shaming started when they failed to pay their balances on time as a result of circumstances beyond their control.

Those who have come forward said people behind the lending app repeatedly called or sent text messages to their contact list including employers, business partners, spouses, relatives and friends about their inability to return the money, causing them embarrassment and emotional stress.

Upon downloading, mobile apps require access to contact information, photos, files and documents saved in the borrower’s phone.

Once those have been submitted, the online loan application can proceed.

If a borrower fails to pay on time, all of his or her phone contacts receive a collection text message or call stating the borrower’s full name and outstanding balance, affected borrowers said.

Regulators and consumer lobbies earlier raised the red flag about customer data protection by the credit-only lenders, the high interest rates or transaction fees that they charge borrowers, multiple borrowing from different lenders, non-disclosure of pricing terms and their lack of dispute resolution mechanisms.

The unregulated credit-only institutions are fast growing partly due to people’s desperation for cash, healthcare or school fees. Borrowers in most cases enter into the arrangements under duress.

With their exorbitant interest rates and conditions, microcredit from the online lenders has plunged many borrowers into a debt trap.

Those who spoke to us said they have been forced to contract multiple loans to pay back for the former ones, and to make huge sacrifices to reimburse them over weeks and months.

Many who spoke to Smart Company anonymously said the loans had plunged their lives into a vicious cycle of austerity, unemployment and poverty.

Dozens of unregulated microlenders — many backed by Silicon Valley Venture capital firms — have invaded Kenya’s credit market in response to the growth in demand for quick loans.

Their proliferation has saddled borrowers with high interest rates, which rise up to 520 per cent when annualised, leading to mounting defaults and an ever-ballooning number of defaulters who have been adversely listed with credit reference bureaus (CRBs).

John Kamau, not his real name, told Smart Company he had no idea what he was getting into when he took out a 30,000 loan with an online lender in 2016 for his cyber café business.

“Like a lot of small businesses and individuals, I made a bad decision by getting into high-interest loans by an online lender,” he said.

The loan was approved in under five minutes, and at the time, it seemed like a good deal, he said.

Kamau later realised that the annualised interest rate on his loan was in fact 500 per cent, which he admitted was “shocking.”

“It’s like a slow death,” he said. “You repay with a lot of hardship.”

Kamau is just one of the small business owners around the country and individuals who, having failed to secure a traditional loan from a bank, turned to online alternative lenders to stay open.

What credit seekers such as Kamau encounter are loans without clearly stipulated terms and a dearth of regulation and oversight. Business owners who aren’t careful can find themselves in extremely uncomfortable positions.

Many alternative lenders take advantage of their non-bank status that allows them to avoid usury laws, which encourage lower interest rates.

Amid the harrowing tales by victims of public shaming and harassment by the digital lenders, the CBK deputy boss on Thursday last week said the regulator and the Treasury were preparing a law that will, for the first time, cover digital mobile lenders in fresh efforts to curb their exorbitant monthly interest rates.

“The government is quite clear that we will change the laws to enable us oversight these lenders. They cannot continue the way they are currently operating,” she said.

“We have a lot of predatory lending out here, which we want to regulate,” she said, adding that the aim of the proposed law is to ensure that digital lenders treat retail customers fairly.

The push to control digital lenders comes two months after Kenya removed the cap on commercial lending rates.

Introduced in September 2016, the law reduced private sector credit growth as commercial banks turned their backs on millions of low-income customers as well as small and medium-sized businesses deemed as too risky to lend to.

“CBK action is long overdue,” said the Consumer Federation of Kenya (Cofek) secretary-general Stephen Mutoro in reference to the banking regulator’s new push for laws to rein in the online lenders.

“[This is a] case of too little too late as millions of unsuspecting Kenyans continue to nurse their financial wounds from predatory, shadowy and criminal digital lenders.”

The credit crunch that followed the rate cap triggered an appetite for digital loans, leading dozens of unregulated firms to invest in Kenya’s credit market in response to demand for quick loans.

Market leader M-Shwari, Kenya’s first savings and loans product introduced by Safaricom and Commercial Bank of Africa in 2012, charges a “facilitation fee” of 7.5 per cent on credit regardless of its duration, pushing its annualised loan rate to 395 per cent.

Tala and Branch, other top players in the mobile digital lending market, offer annualised interest rates of 152.4 per cent and 132 per cent respectively.

Digital loans are short-term, typically with a repayment period of less than one month. Borrowers who repay their loans earlier are still required to pay the full amount, effectively pushing up their annualised percentage interest rates.

Borrowers who roll over their loans are still required to pay interest on the outstanding amount, with some lenders charging an additional late repayment penalty.

Listing borrowers with CRBs and charging late repayment fees are the most common methods lenders use to deal with cases of failure to repay the loan within the agreed period.

Banks, microfinanciers and saccos are regulated under the CBK Act and the National Payment System Act while chamas are regulated under the Societies Act.

CBK licenses and regulates electronic retail payment service providers in addition to all deposit-taking financial institutions.

by nation.co.ke


Spread the love by sharing this post with family and friends
  •  
  •  
  •  
  •  
  •  
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Business

Bodaboda chama grows into a multi-million shilling housing cooperative

Published

on

Spread the love by sharing this post with family and friends
  •  
  •  
  •  
  •  
  •  

A journey of a thousand many miles starts with a single step. A Nakuru-based bodaboda operator’s self-help group proved this in its growth. Driven by the ambition to have something to take home once they couldn’t ride any more, ten bodaboda operators from Barut, Nakuru West in 2015 formed Kianjahi Group, pooling a minimum savings of Sh100 per week per person.

“Being a bodaboda operator is a risky job and has serious effect on one’s health especially if you don’t dress properly for the cold. After attending a seminar in Machakos we decided to start making savings,” said Benson Sigei, the group chairperson.

The group grew as more members joined in 2016. After evaluating their progress, the members increased their weekly savings to Sh200 and eventually to Sh1,000.

“Before the year ended we were nearly 100 members. Our savings were growing and we had to come up with plans which some members considered as too ambitious and pulled out,” says Sigei. With savings of nearly Sh2 million, they bought a 1.6-acre piece of land which was previously a sand quarry.

“It cost us Sh2.1 million in buying the land and rehabilitating it to usable standards. We embarked on making savings for constructing houses which would be of similar design,” he said.

To make this possible they converted the group into Kianjahi Housing Cooperative Society Limited and introduced Sh15,100 registration fee and minimum share capital of Sh60,000 payable in Sh500 weekly instalments.

AmpThe group started the construction of two-bedroom houses in a gated community model.

“Every member now contributes a minimum of Sh1,500 for savings every week. Those yet to clear their share capital make an additional payment of Sh500. This amount does not exert great pressure on the riders since the majority make nearly KShs1,000 per day.

The group then started the construction of two-bedroom houses in a gated community model where four houses sit on every 50 by 100 feet plot. The cooperative completed the construction of the first 50 units majority of which have already been occupied.

“We took a Sh15 million loan and in addition to our savings we bought an additional acre of land at Sh2.1 million. In the first phase, we have constructed 52 housing units. 35 members have already moved in,” said the vice-chairman.

The cooperative has bought a third parcel of land on which they intend to set up houses for all members. Members who moved in during the first phase like pay Sh2,000 per month. Sh200 goes to savings and Sh1,800 going towards offsetting the cost of construction. The payment for the houses is spread over seven years.

by Standardmedia.co.ke


Spread the love by sharing this post with family and friends
  •  
  •  
  •  
  •  
  •  
Continue Reading

Business

Enough is Enough: Kenyan man in US relocates to motherland to become a farmer

Published

on

Spread the love by sharing this post with family and friends
  •  
  • 2
  •  
  •  
  •  

In a bold move and which took great courage, a former Kenyan Diaspora man Kunga Kihokia who was born and raised in Miami Florida has moved back to Kenya, bought a 20 acres piece of land and established an organic farm in Murang’a.

Initially, Kunga had planned to be in Kenya for three weeks 5 years ago but after what he says was the realization of the problems affecting Kenyans because of western lifestyle which he himself was struggling with, he felt strongly to start an organic farm to address those problems.

Kunga has built a water tower to use gravity that allows the water to get pumped and distributed  through  irrigation into the field. Everything in the farm is powered by solar energy and he has dug a borehole that supplies enough water for the farm. Watch the video, be inspired  and enjoy.

Source: Diasporamessenger.com


Spread the love by sharing this post with family and friends
  •  
  • 2
  •  
  •  
  •  
Continue Reading

Business

Carpenter hopes payday in sight in 27-year fight over presidential seats

Published

on

Spread the love by sharing this post with family and friends
  •  
  • 1
  •  
  •  
  •  

For the past 27 years, Solomon Njoroge Kiore has battled with the government over a debt that was initially Sh195 million but has now ballooned to more than Sh500 million in an unpaid bill for presidential furniture he delivered.

Tomorrow (Monday), Mr Kiore will go to the High Court in Milimani hoping that the end is in sight as he is supposed to get a hearing date for a case that has had many twists and turns.

In 1992, Mr Kiore, the proprietor of Furncon, a furniture company, won a government tender to supply presidential furniture but down the line, the deal went sour when the military officials returned the chairs a year after President Daniel arap Moi had used them — allegedly without payment.

The chairs had been acquired through the Ministry of Defence and approved by State House, according to court documents.

The government has denied failing to make the payment and he went to court to seek redress in 2007.

Although Mr Moi used the chairs for a year, Furncon says the military returned them to his workshop.

With the matter dragging through the courts for years, in February 2018, a decision was reached to settle out of court.

But the parties could not agree on the amount to be paid, with the businessman citing lack of goodwill on the side of the state.

Sh527 million

That year, Mr Kiore was seeking Sh527 million, being the price, court costs and storage charges.

He told the court he did not receive any invitation to negotiate a settlement.

Then last year, Symon Yator Cheberek, a military colonel, took over the case after Attorney General Kihara Kariuki appointed him to represent the state in all civil matters in which the Ministry of Defence is a party.

High Court judge Joseph Sergon allowed Col Cheberek to act for the state, but Mr Kiore objected this saying allowing a military officer to take up the matter was tantamount to court-martialling him.

“There can never be a situation where a civilian can be in court one on one with a distinctive disciplined and uniformed force,” he stated in an affidavit on March 25, 2019.

Col Cheberek said he is an advocate of the High Court of Kenya and the Attorney General was in order to appoint him.

Mr Kiore wants Justice Sergon to recuse himself from hearing the matter, alleging bias and citing a 2017 ruling by Justice Philip Mwongo barring the military from taking over the case.

Justice Sergon has declined the recusal plea, saying the claims of bias could not be proved.

 Now, Mr Kiore says his business has died, as he can no longer use the premises where he has kept the chair as it is an instrument of power.

“It was used by a President for a year. It is treasured and therefore no one is supposed to touch it. My business has suffered immensely because of this seat,” he says in his court documents.

In a letter dated May 10, 2001, the Attorney General informed Mr Kiore that the Department of Defence had extended a without-prejudice offer purely out of honour and respect for presidential instruments.

“However, having realised that your claims include other items worth millions of shillings reflective of your other financial issues not related to the chair in question, it has not been possible to formally make the offer to you,” states the letter signed by V Onyango, a deputy litigation officer at the State Law Office.

Admission of liability

The offer, the officer states, is not the government’s admission of liability, because “the said chairs were ordered by the Agricultural Society of Kenya”.

The September 1992 deal was not the first. Mr Kiore’s company had sold furniture for VIP use in State functions to the government before.

He says the seat was made under strict supervision of the military and State House staff.

The firm says it was asked to make more furniture for presidential lounges at the Eldoret Moi Airbase and Kahawa Garrison and deliver the chairs to the Agricultural Society of Kenya offices in Nairobi for a three-day presidential function.

But the President ordered that the furniture remain at the ASK offices, according to a letter by the ASK dated August 5, 1999.

Now, Furncon wants a declaration that the ownership of the items was passed on to the government in September 1992, under the National Flag, Emblems and Names Act and as such they are instruments of power.

by nation africa


Spread the love by sharing this post with family and friends
  •  
  • 1
  •  
  •  
  •  
Continue Reading

Special Offer: Own one starting at Ksh 3.7M


poapay3

Like us on Facebook, stay informed

NEWS TRENDING RIGHT NOW

2020 Calendar

February 2020
M T W T F S S
 12
3456789
10111213141516
17181920212223
242526272829  
satellite-communication1.jpg

Trending