Pundit, HK, What’s happening?

[MOON Ki]

I choose to celebrate the fact that as of last year 6M Kenyans were able to borrow money (access to credit is key to become first world) digitally. We are basically leapfrogging - and that is how to become first world quickly.

Sigh.   If only it were that simple ...  then, surely, we would all be in the first world.   But perhaps you can explain it all to me.    Looking at the countries that have most recently made the rapid economic journey from the bottom---and I am here thinking of East Asian countries---I can see how access to credit is important.    But in all those cases the credit went into evidently productive activities that propelled the economy with manufacturing taking the lead.    How "personal loans", with a whopping 31% going into trivial and unproductive gambling, can be compared with that is unclear to me.    Please explain; and in your explanation, keep in mind that Kenya's economy is a long way from one that is driven by the provision and goods under the umbrella of "consumer spending".  In other words, what exactly are the 6M Kenyans doing with their borrowings that will move Kenya into the "first world"?

Usage of loan..

35 per cent of Kenyan digital borrowers use digital credit to meet day-to-day household needs while 37 per cent borrow for business reasons.

35%  borrowing just to meet day-to-day household needs seems to be a very serious problem.  Ati "first-world problems"!.     Among other things, it tells us that whatever they do "for a living" is  nowhere near enough to actually make a living.    The fact that the borrowing is "digital" does not hide or help with the obvious financial distress.  Or should it be celebrated as a "first-world problem" because smartphones and computers are involved?

On Savings...
The report also shows that 46 per cent of digital borrowers in Kenya also save digitally while 18 per cent have never saved digitally.

So?

[MOON Ki]

As you latch on the few negatives - digital loans are helping kenyans fight poverty.
https://docs.google.com/viewerng/viewer?url=https://s3-eu-central-1.amazonaws.com/fsd-circle/wp-content/uploads/2018/10/23160405/Mshwari-Briefs-10-23-18-1.pdf&hl=en_US

I looked at that.  That is "key evidence"  to support your case?   Of how Kenyans  are fighting poverty and preparing to join the "first world".    Really?

The very first sentence of the report says that

Study finds that among a segment of new M-Shwari customers with low credit scores, digital loans help families pay for schooling and cope with emergencies, but impacts are not evident in their overall incomes or wealth.

I am prepared to believe that.    So?   Is that the type of credit you believe will quickly move Kenya into the first world?

And the conclusions has this:

bridge cash shortfalls in their finances rather than to invest and build assets that might lead to improvements in incomes and wealth.

That's simply great news.   Amazing actually.   Fighting poverty without improving incomes and wealth.    The poor to stop being poor by simply borrowing but not actually increasing their incomes or wealth.  Red will become blue, but without a change in colour.   Wow.   That's way past amazing ... MIRACLE!!!

Wake up, First World!   Here comes Digital Kenya!

[RV Pundit]

Once we unlock mpesa from 70K transaction cap and 140k daily limit these loans will increase.I bet majority of huge credit card borrowing abroad are similarly used to meet short term needs

[hk]

Once we unlock mpesa from 70K transaction cap and 140k daily limit these loans will increase.I bet majority of huge credit card borrowing abroad are similarly used to meet short term needs

The question is why is the default rate so high, 20%.? Mind you the average loans is less than 10k , this flies in face of the supposedly thriving economy. Its a contradiction. Very few kenyans can afford fintech(shylock) loans of more than 70k so unlocking Mpesa daily limit will have minimal effect. Banks like Coop, KCB, and equity lend more than 250k to 1m via mobile apps. The question isn't accessibility but affordability. No businessman or household can justify borrowing at about 84% annual for return that's less than 12%. 

[RV Pundit]

The default is high because this algorithm/machine based lending. They are lending to students and even kids. They need to refine their lending with more and better behavioral data. But they pretty much have prized that into their high interest rates.

Again we start from accessibility then we go to affordability - because affordability most of time is about scale - the more customers - the cheaper  it will be for lenders- who can then transfer the benefits to customers.

If you want Kibaki era lending - where a few civil servants and formal workers - were getting cheap personal loans - you'll wait a little longer.

Mshwari are able to dispense more than 100B Kshs annually based on some algorithm.....and we are at the infancy here.

The question is why is the default rate so high, 20%.? Mind you the average loans is less than 10k , this flies in face of the supposedly thriving economy. Its a contradiction. Very few kenyans can afford fintech(shylock) loans of more than 70k so unlocking Mpesa daily limit will have minimal effect. Banks like Coop, KCB, and equity lend more than 250k to 1m via mobile apps. The question isn't accessibility but affordability. No businessman or household can justify borrowing at about 84% annual for return that's less than 12%. 

[hk]

The default is high because this algorithm/machine based lending. They are lending to students and even kids. They need to refine their lending with more and better behavioral data. But they pretty much have prized that into their high interest rates.

Again we start from accessibility then we go to affordability - because affordability most of time is about scale - the more customers - the cheaper  it will be for lenders- who can then transfer the benefits to customers.

If you want Kibaki era lending - where a few civil servants and formal workers - were getting cheap personal loans - you'll wait a little longer.

Mshwari are able to dispense more than 100B Kshs annually based on some algorithm.....and we are at the infancy here.

The question is why is the default rate so high, 20%.? Mind you the average loans is less than 10k , this flies in face of the supposedly thriving economy. Its a contradiction. Very few kenyans can afford fintech(shylock) loans of more than 70k so unlocking Mpesa daily limit will have minimal effect. Banks like Coop, KCB, and equity lend more than 250k to 1m via mobile apps. The question isn't accessibility but affordability. No businessman or household can justify borrowing at about 84% annual for return that's less than 12%. 

Here is the report https://www.centralbank.go.ke/uploads/financial_inclusion/1035460079_2019%20FinAcces%20Report%20(web).pdf . The defaults are for kiosks and mama mbogas. I am disputing the premise that the economy is doing well and the report above is a attestment to that.

[RV Pundit]

Every year the economy is bad for you. Therefore it's really hard to compare say good years and bad years.

Here is the report https://www.centralbank.go.ke/uploads/financial_inclusion/1035460079_2019%20FinAcces%20Report%20(web).pdf . The defaults are for kiosks and mama mbogas. I am disputing the premise that the economy is doing well and the report above is a attestment to that.

[hk]

Every year the economy is bad for you. Therefore it's really hard to compare say good years and bad years.

Here is the report https://www.centralbank.go.ke/uploads/financial_inclusion/1035460079_2019%20FinAcces%20Report%20(web).pdf . The defaults are for kiosks and mama mbogas. I am disputing the premise that the economy is doing well and the report above is a attestment to that.

You got jokes  , yes I have been pointing  out privates sector troubles from 2015 or there about. Personally not complaining but no one operate in a vacuum.