Many Kenyans are hard pressed economically and survive through borrowing that includes cash for domestic use, buying farm inputs, stock for enterprises, motorbikes and mobile phones. The borrowers, however, go through harrowing experiences repaying the loans from numerous lenders who are largely unregulated.
Ruth Michael, 26, from Lurambi subcounty in Kakamega narrated her ordeal with a certain mobile phone lender. She had lost her phone while working at a hotel and decided to go for one offered on hire purchase. Buyers make a deposit, take the phone and pay the balance daily.
“I lost my phone and went for the Lipa mdogo mdogo one, where I chose Tecno Spark 9 that cost Sh14, 000 if one paid cash. I was asked to deposit of Sh4, 500 and then Sh85 daily without fail for one year,” Michael said.
This saw Michael pay Sh35, 024 – more than double the price of the phone, at the end of the one year repayment plan. She knew she would be able to pay daily premiums comfortably as she was working, despite the plan being exploitative, because she had no money to buy the phone.
“The job ended before I finished paying for the phone and that was when the shocker came. I learnt that when you default remitting a day’s premium, you are penalized by subtracting the payment you made the previous day and you are forced to pay two days to continue using the phone or it would be remotely switched off by the lender regardless of how much you had so far paid. You can only use the phone when you have paid for the day, or you are cut off the grid. It forced me to buy a cheaper phone for Sh2, 000 that I would use in the event I was cut off for delayed payment because I was not sure I would get money to pay daily,” Michael said.
She said lenders take advantage of the hard economic times and the necessity of smart phones for accessing key services to exploit Kenyans.
“The government should rein in the lenders because their terms are exploitative and violate any known financial regulations. The law does not allow interest charged on any loan to surpass the principal amount,” she said.
By Janet Namalwa