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‘Traumatizing’: How Kenya’s Malicious Digital Lending Apps Intimidate Borrowers | Global development

FEstus Kiprotich leafed through the terms and conditions of the loan he was about to take out. Struggling with expenses he was unable to afford, the 24-year-old had turned to several digital loan apps for around 20,000 shillings (£150) in credit. Loan repayment terms were short and he would have to repay about 40% more than he had borrowed. But, feeling desperate, he clicked “ok”.

Two weeks later, when Kiprotich defaulted on his loans, he wished he had read the terms more closely. Agents from three of the four loan apps he had used began calling and texting him incessantly throughout the day, urging him to repay the loans.

“Their demands were unreasonable,” he says, adding that he often had less than an hour to comply, or be “outed” as a defaulter to all of his contacts, whose details they could access once he had installed the loan app.

“It was traumatic,” he says of “debt shaming.”

Text from a lender threatening to contact a user’s contacts. Photography: handout

Kiprotich is among a growing number of borrowers who have been harassed and shamed by unlicensed digital lenders. Philip Ogola, a mental health advocate, says the harassment has left some Kenyans deeply upset – a number of whom have contacted him directly. Some of them have formed a private Facebook support group called Victims of loan application in Kenyawhich has more than 3,000 members.

Digital lenders in Kenya still operate largely unchecked. In October last year, the authorities introduced new laws to regulate the industry, but in September only 10 out of 288 qualified for a license from the Central Bank of Kenya after asking operators to submit their documents for review this year.

More than 80% of Kenya’s adult population uses “mobile money” providers, and digital lending services have become a more and more important ability for people to access credit, as many are unable to obtain loans from traditional providers such as banks. Ken Gichinga, an economist, says unlicensed lenders are exploiting this fact and many are charging astronomical interest rates over short repayment periods, prompting a rise in complaints about predatory lending practices.

Digital lending apps require certain permissions upon installation, including access to users’ private information such as their contacts, text messages, location, and calendar. They use this data to filter user behavioral data and assess their eligibility for loansbut dishonest lenders exploit this information when borrowers default, with disastrous consequences.

For Immaculate Omondi, 30, who says she turned to apps after an investment failed, it meant going to work one day to find that app agents had contacted some of her colleagues and friends, saying that she had listed them as guarantors and they would be blacklisted by the Central Bank of Kenya if they failed to repay her loans. She also says they sent false notifications of lawsuits they allegedly filed against her.

She then complained about the breach of her private information to the Data Protection Commissioner (ODPC). More than half of the complaints the bureau handles relate to how digital credit apps work, prompting it to open surveys of about 40 lending companies last week.

Mugambi Laibuta, a data privacy lawyer, says Kenya’s data protection laws protect users from unnecessary disclosure of their private information. Under the regulations, all data collected must have a legitimate purpose, such as credit scoring, and lending applications must inform borrowers, in plain and simple language, of what data will be collected and how. they will be used.

A screenshot of an intimidating message sent to a source by a loan company
Another screenshot of a loan company trying to “debt the shame” of a borrower. Photography: handout

However, Laibuta says that despite strong legal protections, unethical practices are likely to persist unless the underlying problem of access to credit is addressed.

“Even if people are unhappy with their right to privacy, they go back [to rogue lenders] because they desperately need accessible credit facilities,” he says.

But Kiprotich says that in the meantime, the various platforms on which unlicensed lenders operate should be subject to increased scrutiny, including the mobile money platforms on which they transact, which are managed by telecommunications companies.

“They look the other way when all of this abuse, intimidation, and bullying happens through their platforms, and even make money from these transactions,” says Kiprotich.

Experts agree, saying telecom companies need to act. “It’s high time they blocked lenders from their networks,” Gichinga said. “They couldn’t survive without the digital infrastructure.”

Apps cited by users for predatory lending practices are also hosted on Google Play, despite having Strategies that prohibit loan apps with repayment periods of less than 60 days, as well as those that expose users to “misleading” or “harmful” financial services.

As incidents of data and financial abuse become more prevalent and demand for digital loans continues to grow, users like Kiprotich say increased borrower protection is even more crucial.

Sharon Machira, Head of Communications and Public Affairs for Google in Kenya, said: “We cannot comment on individual apps, but when we become aware of an app that may violate our Google Play policies or local law, we review it and take action if necessary, which may include blocking the app.”

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