CREDIT MANAGEMENT
Is Shaming Borrowers The Way To Collect Debts , Or It ' s A Mere Shortcut ?
By Wasilwa Miriongi
I have been following several loan pages on social media , and there has been an almost daily post of borrowers from mobile lending Apps complaining about the lenders reaching out to their contacts on their mobile phone , with the clear intention of shaming them . Some have even gone to the extent of claiming they will not pay because they have been embarrassed .
The traditional media has not been left behind . One radio station runs a program in the afternoon where people call in , giving names of those who owe them , intending to shame them . While this is rampant with mobile lenders , other backstreet lenders and some debt collection firms apply such practices in pursuit of defaulters .
But first things first , historically , in 2007 , Safaricom , Kenya ’ s biggest telecoms provider , launched MPesa , a mobile wallet that allowed users to send and receive money and buy airtime . This was an unprecedented revolution in Kenya . At that time , Smartphones were becoming popular . The technology was tailored specifically via fintech product to the basic cell phones most Kenyans already owned .
When fintech took off , banks took cognizance of it and developed products in line with the technology . Other Kenyan companies also began competing for the same clients . One of the first savingsand-lending Apps , called M-Shwari , was launched in 2012 through a partnership between a local bank and Safaricom . Some of its earliest users were Kenyans in the informal economy , but over time it has become a source of borrowing for anyone across board in need of quick cash .
Mobile lending business seems to be a method of lending embraced by many
The unchecked growth in digital lending has come with numerous challenges . There ’ s growing evidence that access to quick , digital loans is resulting in a spike in personal debt among users in Kenya . Shaming tactics employed by digital lenders to recoup loans from defaulters , including sending messages to numbers in the borrower ’ s phone contact list from family to work colleagues , have also gained notoriety lenders and borrowers alike ; no wonder it has been dubbed " The Digital Credit Revolution in Kenya ," but it has brought forth the inevitable side that we are now experiencing a form of debt burst which calls for societal action . There are more than 50 Apps and online lending that allows customers to access credit through them .
The unchecked growth in digital lending has come with numerous challenges . There ’ s growing evidence that access to quick , digital loans is resulting in a spike in personal debt among users in Kenya . Shaming tactics employed by digital lenders to recoup loans from defaulters , including sending messages to numbers in the borrower ’ s phone contact list from family to work colleagues , have also gained notoriety .
Predatory lending has become so common and legitimized that it has left many borrowers suffering its effect . For those of us who may not know what predatory lending means , it is defined as “ any lending practice that imposes unfair or abusive loan terms on a borrower . It is also any practice that convinces a borrower to accept unfair terms through deceptive , coercive , exploitative , or unscrupulous actions for a loan that a borrower doesn ' t need , doesn ' t want , or can ' t afford ."
For example , they may include in their so-called ' Terms Of Service ' like " In the event , we cannot get in contact with you or your emergency contact , you also expressly authorize us to contact any
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