Kenya damaged by Fintech Lenders
In recent years, the African continent has experienced the economic growth of some of the countries in the region, which has helped millions of people have a better quality of life. Among these, the case of Kenya stands out, a country that only in 2019 had an economic growth of 5.7% on average. Likewise, despite the fact that the Covid-19 pandemic affected growth in 2020, contracting growth between 1.0-1.5%, the economy is expected to recover in 2021, increasing GDP by 6.9% (World Bank, 2020). Furthermore, financial inclusion in the country has developed well in the last 15 years, leading to an increase from 27% in 2006 to 83% in 2019.
This economic development was mainly due to the advances in telecommunications, transport and agricultural activities. Yet, another major reason for the growth of the Kenyan economy is the innovation in IT. This greater importance given to the innovation sector in Kenya has made it possible, among other things, to place Kenya in the second place of the African countries with the greatest advance in Fintechs only behind South Africa. Furthermore, Kenya is currently in the 42nd position worldwide (Findexable, 2019).
The Kenyan Fintech ecosystem is primarily focused on the categories of payments and lending (Findexable, 2019). In the case of the digital Lending platforms, these services are bridging the gap for Kenyans who don’t have formal bank accounts, or whose incomes are not stable enough to borrow from formal financial institutions. Consequently, this has meant that the number of digital credit agencies in the marketplace grows daily. However, one problem that the Kenyan lending platforms are facing is the little regulation to the sector and the fact that while the sheer number of credit agencies willing to lend has spurred the growth of small businesses, many users have come into debt distress in the absence of guidance from the government on how to borrow sustainably. This has caused the Kenya Credit Reference Bureau (CRB) to blacklist 2.7 million people for not being able to repay loans of as little as $ 2, which shows that financial inclusion has some downsides if products are not efficiently, regulated (African Business, 2020).
Although there has been progress in the country’s economy, the covid-19 pandemic affected the country in good proportion, leading to poverty of 2 million people in a continent that is characterized by its high levels of poverty. This opens up ground for Fintech companies to support the economic development of the country and especially for loan Fintech companies so that they can support small businesses affected in recent months, but it is also necessary a greater control to the Fintech sector so that they can be efficient and effective in the services they provide
