Beware! Your favourite loan app could make you the laughing stock

Are you a defaulter of a mobile phone app loan? You may need to brace yourself for tougher times as lending platforms have now devised ingenious ways, that might infringe on the privacy of its clients, to compel defaulters to honour their debts.

In what looks like a pay-up-or-get-embarrassed scenario, some companies are sending text messages to the defaulters' contact lists, urging them to compel the debtors to pay up.

With no recourse, Kenyans have now turned to social media to express their anger over how these loaning applications are going about their debt collection.

“They started calling my colleagues at work. I even wrote them an email complaining, but they did not respond, yet I had told them I would pay the loan later no matter the interest,” said one Twitter user.

Another complained about the interest accrued on the principal amount he had borrowed.

“Those people are thieves. I borrowed 4,500 from them so nikadelay kulipa and I ended up paying Sh7,260, and their calls!" he ranted.

With the mushrooming of mobile app loan services, an equally huge number of people have continued to register for the services, most of which mirror the data on the phone.

A lack of data protection laws, as well as lack of knowledge by some users, have led to the development of a nearly rogue culture by application operators.

The loaning platforms, which use highly predictive behavioural analytics to examine data from a user’s phone, reach out to borrowers who may not necessarily be able to come up with collateral required in conventional banking.

Tighter credit regulations in the banking sector have resulted in lower credit growth, especially when it comes to households and small business owners.

Moreover, the loan disbursement, done through mobile phones, is instant, allowing users to bypass formalities in the commercial banking systems.

Borrowers have complained of how mobile loaning firms make them lose close friends and families due to their loan status.

On default, some companies contact as many contacts on your phone book as possible in a bid to recover their money.

Sharon says she took a loan of Sh14,000 from one of the firms but paid half of it. She says she has plans of repaying the balance, which she is yet to get as she is a casual labourer.

She says that even after promising to pay, the loaning firm sends her countless messages daily, calls her friends and family members over the unpaid loan.

“They text you up to four times a day; sometimes I receive calls from debt collection agencies who say they have been contracted by the company to collect,” says Sharon.

Central Bank of Kenya (CBK) data shows gross non-performing bank loans grew 45.35 per cent in 2016 to Sh208.18 billion, signaling a significantly high default rate.