Make digital credit more affordable

About 1.8 million digital loan defaulters took advantage of a six-month credit repair window to settle their loans on relaxed terms, pointing to the many Kenyans desiring to have a clean credit rating.

The borrowers, many negatively listed for defaulting on loans of up to Sh1,000, were part of about 44 percent of the more than 4.2 million accounts targeted by the Central Bank of Kenya-backed initiative.

However, given that not even half of the targeted borrowers warmed up to the discounts of at least 50 percent of the non-performing loans shows more needs to be done in terms of pricing these digital loans.

In a market where short-term loans still come with fees and interest rates that top 400 percent annual percentage rate, it is possible for borrowers to give up on repayments.

Banks and other digital lenders giving out mobile-based loans should strike a balance between getting a decent return and allowing the borrower to enjoy affordable credit.

Many people tap into these mobile loans for emergencies such as footing medical bills or buying a day’s meal.

There are many good borrowers in the economy whose lives and livelihoods were severely impacted by shocks such as Covod-19 and affordable rates will be key in encouraging repayments.