Survey: Shopkeepers hardest hit by defaulters, mobile loan app follows

NAIROBI, KENYA: Are you a shopkeeper and planning to offer your goods or services on credit to your friend, neighbor or a family member? You have to think twice.

A new survey by Central Bank and the Kenya National Bureau of Statistics shows that shopkeepers are more likely not to recover money from such transactions followed by the mobile app companies in the credit business.

On the other hand, loan rate default on Shylocks was the least followed by government, banks, Sacco and Chama.

Major reasons for loan default across selected providers include failure to understand terms, poor business performance, unexpected emergency expenditure, payments getting more than the expected and higher interest rates.

Reasons why many fail to honour agreements with the shopkeepers include lack of proper planning, higher interest rates and cases of borrowers diverting money to basic needs such as food or utility bills. In a pointer to most borrowers not taking the shopkeepers facility seriously, the survey also found out that the default was due to borrowers giving priority to other loans.

“Unexpected emergencies and borrowers forgetting to pay the loan all together are also factors shopkeepers grapple with in recovering debt,” notes the survey.

When dealing with banks, nearly all borrowers seem to understand the terms and conditions of the loan as none of the respondents gave alluded to it as reasons for not servicing their credit. Major reasons for defaulting mobile phone related loans emanated from poor business performance on the side of borrowers, high-interest rates, failure to understand terms and the payment being above what borrowers expected.

The 2019 survey focused more on the usage, quality and impact/welfare dimensions of measuring financial inclusion.

In addition, the questionnaire incorporated a needs-based framework to the measure the relevance of financial services and products; financial health and livelihoods modules; and consumer protection and financial literacy.

The survey dataset is robust and provides insightful findings to policy makers, regulators, private sector actors, development partners, researchers, and academician.

“The surveys’ datasets should encourage further research to better understand the underlying dynamics and drivers in order to provide possible solutions and policies to emerging challenges.”