Late payment means public shame

July 26, 2020 6:06 AM

For nonprofit news site Rest of World, which covers global tech stories, Morris Kiruga reports on a popular fintech app in Kenya and Nigeria that shames users who are late with their payments. The absence of regulation has many perks for the sector and one major liability: As companies soon discovered, if a user does not pay back what they have borrowed, plus interest, there is little a digital lender can do. ...(but) flag defaulters to one of Kenya’s three credit reference bureaus (CRBs), effectively locking them out of the credit market. ... Between 2014 and 2017, about 2.7 million Kenyans were negatively listed with a CRB, 15 percent of them for defaulting on loans of less than about $2. Last year, “how to check CRB status” was among the most-Googled questions in Kenya, between “how to be successful in life” and “how to get pregnant.”

Before long, digital lenders started looking into other methods of recouping their investments. Skip tracing, the ancient art of finding someone who owes you money and making them pay, was virtually nonexistent among fintech companies until early 2018. Coincidentally, that was the same year that Opay, a fintech company partially owned by the software-maker Opera, launched OKash in Kenya. The majority of Opera’s operations had been bought by a consortium of Chinese investors two years earlier, and shortly afterward, the company went on an expansion spree, announcing plans to invest $100 million in East Africa. While Opera’s then managing director, a former banker named Edward Ndichu, said at the time that the app would protect users’ personal information, he never explained how the company planned to safeguard its financial investment. But the answer was buried in OKash’s terms and conditions: When users download the app, they give it permission to access their contacts.

posted by Bella Donna (7 comments total)

Really, really great article, thank you.

I'd wonder how this compares to Orange Money, which is offering much the same kind of service in Senegal, but is run by Orange, the French conglomerate.

A quick check online tells me that MPesa is run by Safaricom, Vodafone from the UK appears to have a 40% ownership share.

Or, you could compare with Expresso, based in Senegal, which seems to be getting off the ground with cell service, but I'm not sure if they're intending to offer money transfers, or if that's a service that they'd be able to offer without a base outside West Africa.

There are a lot of basic issues about how tech can go wrong here. Also, issues to pull apart about how much power and influence there is or isn't at the national level to control it, whether it's the continuation of colonial structures or the power structures of current global capitalism. (Those overlap, of course.)
posted by gimonca at 7:09 AM on July 26, 2020 [3 favorites]

Instant loans by predatory lenders are a problem everywhere they exist, or so I imagine. I found the topic of the post when looking for info about instant loans here in Sweden. The grandson of a celebrity here killed himself last year after he incurred a huge debt by gambling online (online gambling apps and websites are big here) and then got an instant loan to pay off his gambling debts, which he was then unable to pay back.

The idea that you can just text (in any country) a finance company and get an instant loan (usually a loan that has an obscenely high interest rate) is astonishing to me. I understand why loan companies are eager to find customers, and I understand why customers exist. I just wish there were more safeguards for the customers.
posted by Bella Donna at 7:54 AM on July 26, 2020 [6 favorites]

An earlier iteration of this (albeit usually much more explicit in the discussions that took place between lender and borrower): One way that microfinance made credit available to countries without that facility was through "Solidarity Lending".

Microfinance is a huge field, and encompasses eveything from predatory loansharks, trhough nonprofits with serious social justice chops. It also encompasses everything from top-down-outsider forms of credit to local-ground-up forms.

And these - amongst many axes - are important to think about before judging the worthiness of the organization (e.g. many outsiders come in with a white-knight perspective, but offer reasonable terms and are genuinely trying to do good, despite their colonial attitudes and the fallout from these. in contrast many 'local' lenders have cultural connections on the ground and the positivity that brings, but take money from fintech/hedge fund types and have a very.....predatory perspective to loans).
posted by lalochezia at 10:09 AM on July 26, 2020 [4 favorites]

This business, frankly, reminds me a lot of drug cartels and their "customers" except there's no need for all that pesky smuggling.
posted by aramaic at 10:40 AM on July 26, 2020 [3 favorites]

This "money" system we have been using seems to bring nothing but problems. Any other ideas?
posted by Meatbomb at 2:57 PM on July 26, 2020

~Danny DeVito voice~
"What are you talking about?! Everybody needs money!
That's why they call it money!"
posted by bartleby at 3:44 PM on July 26, 2020 [2 favorites]

You know I look at a decade or so of my collected contacts on my iPhone and shudder at the thought of a text being sent to them all. Although I suspect a lot of random restaurants, vets, and dry cleaners would be little confused. But yeah time to cull them all out (along with associated app craft and other digital detritus that collects over time)
posted by inflatablekiwi at 12:20 PM on July 27, 2020 [1 favorite]