(Ecofin Agency) - Many large commercial banks in Kenya have announced they have cut the amount of credit granted through mobile phones. Kenya Commercial Bank, one of the largest banking institutions in the East African country, says it has reduced the volume of credit it provides through this channel from KSh10 billion to KSh5 billion. Equity Group for its part has decided to lend only to those who own a bank account within the company.
To support very small businesses and households during the covid-19 period, the Central Bank of Kenya has, among other measures, called for the suspension of the publication by credit bureaus of defaulting debtors between early April and late September 2020. Bank officials believe this has led to an increase in delinquency rates among borrowers.
The risk of an accumulation of bad debts was too high because the approval of microcredits granted via mobile phones by banks is done on a platform that takes into account the positive points present in the history of the borrowers. However, with covid-19, several thousand people found themselves unable to repay their loans, either because their activities declined or because they lost their jobs.
The banks' decision was in favor of Safaricom, Kenya's mobile phone and money transactions leader. Its financial overdraft platform, Fuliza, saw a flow of new loans up to 149.5 billion shillings over the period reviewed. This figure is up by more than 33% YoY. Disbursement processes on the platform are easier and interest rates are quite low for borrowers.