Premium
Protect poor borrowers from predatory lenders
These are certainly difficult economic times, with many families struggling to provide basic needs and unable to put even a single meal on the table daily. Ironically, these people’s agony and suffering are the joys of others, who exploit this sorry situation to enrich themselves.
The people struggling have been thrown a lifeline through the vibrant “Lipa mdogo mdogo” system that enables customers to make part-payments for goods and services. It is much like the hire-purchase schemes of yesteryear and similarly comes with pleasure and tears in equal measure.
This is a consequence of unfriendly government policies that push desperate households with shrinking incomes into shady credit schemes.
This flexible payment plan often comes in handy for young people keen to own sophisticated mobile phones, which they cannot afford to pay for all at once. They raise a deposit and make monthly remittances of under Sh100 for the smartphone. Many Kenyans, including boda boda operators and those wishing to buy electronic goods, furniture and even land, have also embraced this system, but it does not always work in their favour. What begins as a major convenience often turns into a nightmare for the borrowers, who end up paying a lot more, and some discover that the gadgets were actually sub-standard when they cease to function.
While some laud the system for making goods and services affordable, others feel short-changed, accusing traders and other providers of exploiting the people’s desperation. It is also not uncommon for a motorbike to be stolen before one clears the loan or halfway through it. Greedy motorbike lenders are suspected of playing a role in this.
With inflation shrinking household incomes, these credit schemes have become the only option for many people. The Central Bank has raised concerns about these unregulated credit schemes that trap citizens in endless repayments. But the demand continues to grow.
A strong regulatory system is needed to protect borrowers from predatory lenders.
