By Gaudence Were—

Financial institutions have often provided tight credit models that are guided by regulations that call for strict compliance mechanisms. Many individuals who may not have access to sufficient assets to provide as security are often locked out from accessing loan facilities through conventional models. Additionally, consequences of defaulting from such loan arrangements are harsh and often have far-reaching effects that stretch from financial instability to negative impacts on an individual’s social life and greatly affect future borrowing prospects.

Traditional credit models are now gradually being overtaken by mobile loan applications. The current trend is a creation culminated by financial institutions properly integrating technology to meet financial needs of middle-class Kenyans, who often seek quick access to money to fuel their lifestyles. Unlike the conventional models, these alternative lending platforms offer quick access to money and are less demanding in terms of security. Perhaps their most and only fundamental requirement is to download the applications on your mobile phone and to create a profile with them. Information that is required ranges from providing national identification numbers to registering with social media accounts.
Unsecured mobile phone applications are popularized on social media, offering subscribers loyalty rewards for a minimum number of referrals. Eventually, they establish a strong and notorious online presence and establish a network of subscribers which is a good marketing strategy that not only secures business continuity but also maintains a constant appeal to new customers whilst retaining the old ones.

These plans have very little to do with trust; save for first-time borrowers. The credit limit for first-time subscribers is restricted, ranging from Kshs. 100 to Kshs. 5,000 varying on an institutional basis. Business success is essentially fueled by the numerous customers’ appeal to quick access to money. Unlike security models that strictly require security, these applications rely on the loan repayment behaviour of its users to determine a customer’s loan limit. It is important to note that frequent users’ focus is more on access to credit rather than the cost of that credit. Customers, therefore, endeavour to repay their loans as scheduled within the timeframes stipulated to keep their loan repayment behaviour on the positive to ensure that their loan limit is increased. The maximum loan limit for most of the applications is about Kshs. 50,000.

Major customers include persons who may need money on the fast instance to fuel their lifestyles as well as owners of small enterprises seeking fast capital financing options. However, reasons, why people make applications under these platforms, are extensive and may include borrowing being a supplementary means of meeting their financial obligations or catering for their daily needs. On a continuing basis, users may develop a deep attitude of gratitude for these quick cash access platforms and perhaps feel that they need the applications more than the institutions need them. Whatever the case, these platforms have made a footprint in the financial sector and might just be the fuel that ensures the success of startup businesses. Critics have however argued that the elongated lifespan of mobile phone loan applications might as well be the doom of boosting individual financial capacity and growth as they are promoting and sponsoring debt-fueled lifestyles.

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