NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, August 16, 2019

By Kevin P. Donovan, Emma Park

Across conversations in Kenya’s pubs and WhatsApp groups, debt is on everyone’s mind. The speed and ease of access to credit through new mobile apps delivers cash to millions of Kenyans in need, but many struggle to repay. Despite their small size, the loans come with a big cost—sometimes as much as 100 percent annualized. As one Nairobian told us, these apps “give you money gently, and then they come for your neck.”

He is not alone in his assessment of “fintech,” the ballooning financial technology industry that provides loans through mobile apps. During our research, we heard these emergent regimes of indebtedness called “catastrophic,” a “crisis,” and a major “social problem.” Newspapers report that mobile lending underlays a wave of domestic disarray, violence, and even suicide. One young man in Meru described it as a “can of worries.” His monthly salary was not enough to cover ordinary expenses such as rent and necessary contributions to extended kin networks—let alone leisure or investments in his own future. So, like millions of others, he turned to phone-based loans, at one point toggling between five different apps. Reeling as the costs added up, he struggled to repay, deleting the apps so he would not be tempted by repeated offers of dangerous debt.

Photo courtesy of Internews Europe.