Chinese leaders are dramatically shrinking a market that spawned the nation’s biggest Ponzi scheme, protests in major cities and life-altering losses for thousands of savers.


Mobile loans are a form of Ponzi scheme. Like it or hate it. Just remember its your money on the line. When Eqwete and kcb are busy running a ponzi, its your money, the depositor, thats on the line.

KCB mobile loan interest charges is low & manageable, comparatively.

Important investment facts

You dont have to be in a crowd to be right.

Sometimes, being too early ( in calling out a situation) is indistinguishable from being wrong ( Horward Marks.... I think...)

And someone cannot accuse banks of being too strict in lending/not lending and lending carelessly in the same thread. He has to make up his mind!

Good people,

These are very great arguments on either side.. My few observations

1) The mobile loans are here to stay and they fulfill a certain part of the financial deepening circle. Convenience, not cost, is their critical success factor for now. Cost will come much later

2) These loans, like all other loans, will build many and destroy others. It depends on how one chooses to use them. Heck, there are guys who bet for a living and you'd be surprised the kind of turnovers they do. Forget the Jack pot guys

3)It is true that like all lending, mobile loans need proper regulation especially if it can hit Ksh8B in a month from one platform. We can imagine the impact and pervasiveness of the sector.

4) The biggest risk is that the small businesses,with short cycles and not so large investments are usually the most vulnerable to social hits e,g riots.. But that can always be mitigated by insurances

Finally, I see this a a new step in the evolvement of the financial sector. First, Kenya had foreign banks, then Nationally owned banks came in and they limited the licencing. To cater for the unmet market and especially for SMEs then, they formed Finance houses ( the likes of I&M, ABC, etc).At one point, these were also granted banking licences and the have done a dime well for themselves. When the licencing was stopped, we saw the growth of MFIs... and now we see Micro lending platforms... In essence, banking is changing and it is for the better.

I like the innovation, it has its risks but it is surviving because it has more advantages than disadvantages. We just need to figure out how to mitigate the risks..

Kila nyani na soko lake,there is a mkt for banks and for safaricom fuliza

I agree. But this is not reckless lending. It is smart lending from a purely business perspective. Not condoning it, but who would refuse to lend at 90% per annum, with a portfolio of, say KES10Mill comprising multiple smaller loans of around KES 1k. Even with a 50% default rate, you are still in the money. So the lending is not reckless, but obviously far from ethical.

it's not reckless. These are small amounts per person. Spreading out to minimise risk while increasing profitability.

Take KSh. 1000000 for instance.
Lending 1000 to 1000 people is far less risky than giving the entire 1000000 to 1 person.

Even Okoa Jahazi is technically a loan. People pay it back religiously without feeling the pinch. Fuliza is following a similar path.

Say you have an overdraft of 5k using Fuliza. Will you close down your line (which is linked to your social and business life, chamas, saccos and even the church register) and buy another one just to avoid the burden, and start all over again with a low loan limit? Meanwhile you find another lender and vow never to use MPESA again?

Safaricom is making leaps because of offering convenient solutions to problems Wanjiku has. Banks have simply not been innovative in developing means of assessing an individual's credit profile, and relying on the traditional modes of lending.

They are not ponzi. Simply good business- high risk but low impact. And unless we are willing to include the, equally pricey, MFI loans, we have no business demonizing mobile loans.

The CBK is the regulator for Banks in Kenya. Banks' lending portfolios form part of regular reporting requirements. I believe that Banks are only lending to their OWN existing clients as they need to meet KYC requirements. If hungry execs wanted to dish out loans for "easy" money, they would simply lend larger amounts without checking credit status or investing in digitisation. The real isssue here is not that Banks are finding new ways to advance loans while distributing risk, it is whether or not the lending is being used to advance loans that are designed to attract penalties, effectively circumventing the interest rates cap. I.e. the one day loan is at 13% per annum but penalties if you don't pay by midnight are another 13%. This is not an actual default as you pay the next day. However, the penalty may yield another 13% annualized charge.