The Dark Side of Mobile Lending in Kenya: A Borrower’s Nightmare

NAIROBI, Kenya – In a desperate bid to save her four-year-old son, who had ingested a five-shilling coin, Grace hastily installed a mobile lending application recommended by her fellow market vendors. Without pausing to review the terms, she entered her information and hit ‘submit.’ At a bustling health center nestled in the cramped alleys of Baba Dogo in Nairobi’s Mathare slums, doctors demanded 1,500 shillings upfront to initiate the urgent treatment her child desperately needed.

Grace’s loan application was approved for 1,500 shillings (roughly USD 11.6), yet she only received 1,050 shillings after a jarring 450-shilling deduction, which she presumed was an immediate interest charge. Faced with the urgency of her son’s condition, she borrowed the remaining amount from a companion who had joined her on that harrowing day. Shortly thereafter, Grace discovered that she was obligated to repay the entire 1,500 shillings within just seven days—an astonishing 43% increase over the borrowed sum.

But this was merely the beginning of her turmoil. On the sixth day, Grace faced an onslaught of harassment—an avalanche of missed calls, menacing messages, and bone-chilling demands for repayment, despite still having one day left. KeCredit’s relentless debt collectors invaded her peace at home and work, weaving a web of anxiety around her. In a bid to regain some semblance of tranquility, she begrudgingly blocked numerous numbers and silenced her phone, desperately seeking relief from the chaos.

“The incessant calls and texts were like a storm; I felt cornered with threats looming if I didn’t pay within the hour. It was pushing me into despair,” Grace recounts. “If it weren’t for my son’s emergency, I’d never invite this level of stress into my life.”

Grace’s distressing saga isn’t isolated. It mirrors the experiences of countless others ensnared by predatory mobile lending practices. Our investigation revealed a troubling pattern of exploitation and emotional turmoil endured by borrowers victimized by these unscrupulous lenders. They prey on borrowers’ vulnerabilities, employing ruthless and unethical tactics.

Many individuals reported being blindsided by exorbitant interest rates and hidden fees, forcing repayment obligations far beyond what they had anticipated. Concerns about the misuse of personal information surfaced, along with the suffocating harassment that transformed what was intended as a financial lifeline into a living nightmare.

Upon installation, digital lending apps usually request permissions to access private details—contacts, texts, locations, and calendars. Although designed to assess loan eligibility, these unscrupulous lenders exploit this data if borrowers default, resulting in grave repercussions.

To grasp the depth of borrowers’ suffering, one of our journalists decided to immerse himself in their world. He downloaded three infamous apps—KeCredit, Ipesa, and KashWay—known for their vicious debt collection techniques, from Google Play on separate occasions. Each was reputed to engage in aggressive tactics, including debt shaming and the harassment of not only borrowers but also their contacts.

Despite possessing a “good credit score” that qualified him for larger loans, he opted for the smallest amounts with short repayment timelines—seven days max—determined to experience the grind firsthand. What ensued was a relentless nightmare. Like Grace and over 200 others who bravely shared their harrowing tales, our journalist endured a torrent of humiliation and dehumanization.

In just 48 hours, he faced more than 1,000 harassing calls and messages from over 60 different numbers, some arriving well after midnight and before dawn, highlighting the harsh reality of these predatory lending schemes. The messages varied from derogatory insults to threats of revealing personal information to his employer, family, and friends, or even marking him with the Credit Reference Bureau (CRB).

“The relentless flood of angry calls and messages felt like a robotic assault,” our reporter remarked.

When he managed to speak with three different callers from KeCredit, Ipesa, and KashWay, their language echoed a familiar, menacing tone. For this foray into the underbelly of mobile lending, our reporter borrowed 1,500 shillings from KeCredit but only received 1,050 after deductions.

From Ipesa, he requested 4,300 shillings and received only 3,456. For KashWay, he sought 3,300 shillings but ended up with 2,376. Repayments were promptly due: 1,500 shillings to KeCredit, 4,800 shillings to Ipesa, and 3,300 shillings to KashWay—all within the week of the loan’s disbursement.

Each of the three lenders presented nearly identical interest terms in their FAQs: “a minimum origination fee of 12% for a 180-day term.” However, the apps dictate the terms, offering no flexibility for borrowers, suggesting that the actual interest rates and total repayment amounts might hover between 39% and 43% above what was initially advertised. Such rates draw the ire of financial experts who deem them exploitative.

Our reporter pressed the callers on the actual interest rates being charged while questioning the ethical justification of their aggressive debt collection methods. Why didn’t these practices align with data protection regulations and the Central Bank’s guidelines against such harassment?

“Quit with the foolish questions. Pay back your money, or you’ll never know peace,” one agent, identified as Mercy, snapped. Another, a man named Gerald, threatened, “We have your family’s, employer’s, and friends’ information. We can expose your private life if you don’t settle your debt immediately. You have 30 minutes.”

The onslaught of calls and messages kept pouring in, each more urgent and furious as time slipped away.

Regulatory Context and Challenges

This May, the Digital Financial Services Association of Kenya (DFSAK) and the Office of the Data Protection Commissioner (ODPC) reported a 75% drop in harassment and shaming by digital lenders following strict new regulations imposed by the Central Bank of Kenya (CBK) two years ago.

These rules necessitate that digital lenders obtain licenses and comply with clear consumer protection mandates, including just interest rates and ethical debt collection tactics. Yet, the landscape appears to be slipping back, perhaps never truly improving at all.

Historically, digital lenders resorted to heavy-handed methods, such as dispatching agents to contact borrowers’ relatives or threatening to disclose loan statuses to employers.

As outlined by ODPC’s Immaculate Kassait, sharing private information or berating the families of loan defaulters violates Kenyan law. Lenders are solely authorized to extend funds to applicants, not to their friends or relatives.

Despite these legislative safeguards, enforcement remains an uphill battle. As of July, only 58 digital credit providers had been licensed by the CBK, while 480 applications awaited review. Yet unregulated or unethical lenders continue to prey on borrowers, exploiting lapses in oversight and their desperate circumstances.

Kassait highlighted that over 1,000 service providers, encompassing digital lenders, educational institutions, hospitals, and telecommunications firms, are under investigation for privacy violations, predominantly concerning the misuse of debtor data by digital lenders.

The Data Protection Act, which took effect on November 25, 2019, imposes fines up to 5 million shillings or 1% of annual revenue for breaches, a deterrent that remains largely ineffectual. Last September, Mulla Pride Ltd faced a fine of 2.97 million shillings for violations. KeCredit, once under Mulla Pride Ltd, is currently operated by Azura Credit Limited, while Ipesa and KashWay, previously managed by XGO Kenya Limited, frequently draw scrutiny for unethical practices.

The Impact on Borrowers

Borrowers express deep concern regarding oversight of unlicensed loan platforms, particularly mobile money services from telecommunications companies facilitating these transactions. Despite Google’s policies banning loan apps with repayment terms shorter than 60 days and those offering “deceptive” or “harmful” financial products, several flagged as predatory remain available on Google Play.

In a nation where access to conventional banking is limited, digital lending plays a vital role, providing rapid, mobile-based credit solutions. Such technology helps extend financial services to those excluded from banks, bolstering both financial inclusion and economic growth.

With over 80% of Kenya’s adult population utilizing mobile money, these digital loan providers serve as a crucial credit source for individuals unable to secure traditional bank loans. DFSAK estimates that digital lenders in the country cater to roughly eight million clients, disbursing between Sh10 billion and Sh15 billion in short-term loans monthly.

However, as anxiety mounts over data and financial exploitation, individuals like Grace and many others fear that without robust protections for borrowers, these apps might plunge desperate Kenyans further down the path of despair.