Are Digital Mobile Lenders the New Loan Sharks?

There are 14 million people blacklisted by Credit Reference Bureaus (CRBs) in Kenya according to the latest figures released by the CRBs, indicating a 45% jump between August 2020 and January 2021. This has been largely attributed to the proliferation of mobile app loans with a 2019 FinAccess report showing mobile bank loans and digital app loans with the second and the fourth highest default rate by loan type respectively. This has led to many people accusing digital app lenders of loan shark tendencies, deliberately lending to people who can’t afford to pay back due to the high interest rates, by use of alternative data such as MPESA transaction history and access to a borrower’s contacts which gives them leverage in nudging borrowers to repay loans in default.

One of the reasons that reinforces the claim that digital mobile lenders operate a debt-trap business model is that they loan a lot of money to the unbanked and underbanked.  This is shown in the significant growth in the number of borrowers who can access quick unsecured loans through their mobile phones easily with no previous credit repayment history. On the flipside, according to Internet World Stats (IWS), Kenya recorded the highest internet infiltration rate in Africa in the year 2020 with 87.2% of the country’s population having been connected to the internet. This presented a huge market to provide the unbanked and underbanked with financial services through the internet, from providing loans and financial literacy through the new pervasive medium, a demographic that had largely been neglected by the formal banking system.

Digital app lenders are also accused of operating with opaque lending practices that does not foster transparency before lending to borrowers. This is reflected in the punitive late payment fees that borrowers are saddled with. These fees end up crippling the financial health of a borrower leaving them in a negative-pay cycle, borrowing to repay loans due. Digital lenders when pressed on this issue, they point out to their terms of service that every borrower must agree to before they access the financial services offered. Hence from their assertion, it is the prerogative of the prospective borrower to assess the terms of the service before agreeing and then decrying when they are enforced.

To rebut these and other claims made against them, digital lenders posit that they don’t just loan to borrowers with debt distress as they invest in technology that utilizes alternative data provided by the prospective borrower to paint a borrower’s ability to pay a loan and the limit determined by the credit scoring engines that heavily rely on data science and machine learning. This enables digital mobile lenders to provide a service that was previously not available to the unbanked and underbanked, hence democratization of finance.

Last year the Central Bank of Kenya (CBK) revoked the approval of digital lenders to share their data with CRBs and exempted those borrowing less than Ksh 1,000 to try and tame the runaway defaulting, and with members of parliament clearing a Bill that seeks to regulate mobile loan rates, this paves the way for a regulatory framework for digital mobile lenders and a wider adoption of financial services by the population to take advantage of the fourth industrial revolution without stifling innovation.

Salary Advance In Kenya On-demand with myNGOVO Mobile App

Salary advance is a short-term financing facility that is advanced to salaried employees in Kenya through the myNGOVO mobile app with no interest charges. Employees can access up to 50% of their net salary through the app any time of the month instantly deposited into their mobile money account for convenience. This allows employers to lift the morale of their workers improving productivity and reducing anxiety over financial stress and employees are able to access their salary advance whenever they need it with no punitive penalties and charges.

How It Works

The turnaround process from initial contact by employer to first salary advance payment request is less than twenty four hours with the whole process automated. Employers sign up for free and myNGOVO is launched inside the company. Employees are then able to download the app and register. After logging in, an employee is able to access salary advance payments any time of the day even during holidays. The employee account is reconciled during their next payday with only a 3.6% origination fee levied on the salary advance payment requested and no interest charges

Get Started

Empower your employees to avoid costly loans that leave them with a negative pay cycle and a recurring debt problem by giving them access to part of their salary whenever they need it. Employees can also refer their employers and we will do the heavy-lifting for you. Contact us today at 0705043366 or send an email to sales@myngovo.co.ke and start your financial wellness journey.

How CRBs In Kenya Make Money

Summary

TransUnion, Metropol and CreditInfo collect and store credit information on individual users from registered financial institutions and make the same information available to other institutions that need credit information on a user for a specified purpose.

So how do these credit bureaus make money?

TransUnion, Metropol and CreditInfo are for-profit organizations hence the need to generate revenue to offset their cost base. With the recent proliferation of mobile loans in the Kenyan financial sector, the role of credit bureaus has increasingly been put on the spot with the risk of over-indebtedness leading to many youths being listed with a negative CRB status owing to defaulting on the micro-loans. If you have accessed a loan from any registered financial institutions with explicit access to share their borrower’s information to the credit bureaus, your information is stored in the databases of either one or more of the three CRBs.

The main channel by which CRBs make money is by creating and selling credit reports of individual borrowers whose information has been shared by financial institutions. This may include accredited SACCOs, banks and online lenders, although they are largely restricted from accessing credit reports stemming from a directive by the Central Bank of Kenya from 2020.

In addition, CRBs may also gather publicly available data to enrich their databases with more data points that lead to a more holistic credit report that directly affects your ability to get liquidity and loans from financial institutions.

The CRBs can then sell the consumer credit reports to a lender trying to qualify a loan applicant or a credit card company determining your credit limit.

The CRBs also sell credit information to companies that want to use the data for marketing purposes. For example, a consumer with a low or negative credit status may be targeted by firms offering loans with no CRB check.

In a nutshell, CRBs do more than blacklist or whitelist potential borrowers. There are other services such as data analytics and their own white-label financial products that CRBs make money but their core business remains collecting, storing and disseminating credit consumer reports.

How to check your CRB status in Kenya

A Credit Reference Bureau is a firm that collects credit information from financial institutions on individual consumers and prospective borrower. This credit information is used for various use cases including determining your credit worthiness and how much a lender can advance financing to you as a borrower depending on your previous loan repayment behaviour. A positive CRB status implies a healthy repayment behaviour while a negative status means a defaulted credit which affects your ability to get a loan reprieve.

There are several CRBs licensed by the Central Bank of Kenya in provision of a centralized source of credit information shared by commercial banks and other financial institutions. They include TransUnion, Metropol and CreditInfo.

With the proliferation of mobile phone use, this has also simplified the way one can access their CRB status without increased friction.

To check your CRB status on Transunion:

  1. You first send your name to 21272 and register or download the TransUnion Nipashe app to avoid the SMS charges.
  2. Enter your ID number and choose your credit status.
  3. You will receive your CRB status.

To check your CRB status on Metropol:

  1. Download the Metropol Crystobol app or dial *433# after paying the registration fee using your ID number to paybill number 220388 and your ID number as the account number.
  2. Use your unique pin to access and view your status.

To check your CRB status on CreditInfo you will need to fill an online credit request form on their website.

With a positive confirmed status you can apply for a loan facility while those with a negative status will have to clear their outstanding loans to improve their creditworthiness. Are you looking for instant loan with no CRB check? Try https://myngovo.co.ke and access salary advance facility today with no interest charges on your mobile phone.

Steps To Better Manage Your MSME and Grow

For many micro,small and medium-sized enterprises (MSMEs) they do not have the luxury of relying on managers but rather the sheer will and ambition of the business owner and proprietor.As the world has become a global village,with business owners forced to acquire knowledge in a variety of fields to remain competitive,solid management skills are vital for the present and future viability of the MSME as a going concern.

With a steep learning curve,MSMEs are faced with the challenge of growing their leadership and management skills beyond that of the business owner.This dictates the difference between success and failure,be it a barber shop with five employees or a restaurant with one hundred employees.

Over 14 million Kenyans,representing about a quarter of the population,are employed by MSMEs in various sectors of the Kenyan economy.This suggests a growing need for skills in team management and effective execution for continued success and increased job creation.

Globalization and an open economy presents a challenge for MSMEs top juggle implementing growth plans beyond their scope and still remain nimble while requiring their employees to achieve more with less resources.Hence they need to come up with structures and processes that are effective even for the smallest business while making maximum utility of time by employees to ensure increased productivity.These structures can lead to:

Proactive resource planning and allocation.

Improved efficiency in business processes.

Increased profitability.

Better customer relationship.

Effective management is a proven recipe for increased workforce satisfaction and less distractions through repeatable processes and guidelines that can be adopted throughout the business as you grow.

Here are the steps you can take towards managing your enterprise more effectively

  1. Plan

Developing a plan of attack is critical in the success if any venture.A well-thought-out plan will give your team a scope of the work before them and harmonize the goals of your employees with the anchor goal for your business.

Breaking down the plan into short-term deliverables while keeping a timeline for the tasks and responsibilities is a way of ensuring the plan is consumed by everyone in the enterprise.This will give you more visibility into the different facets of the plan hence better resource allocation and accountability from your team.

2. Effective Communication

Effective communication of the underlying goal to the team,be it on a monthly,quarterly or annual basis ensures the team is hyped and motivated working towards a shared vision.Making it easy for employees to update their supervisors on any anomaly or opportunity that arises can often lead to an enterprise being able to defend their position in the market or even start a different service provision occasioned by seamless and effective communication.

3. Technology

Business processes have become proliferated with technology tools that have become useful in conducting repetitive tasks in an enterprise. Combining technology that harnesses simplicity and efficiency will unlock the potential of your firm to do more with less.

In a nutshell

While it can be challenging for MSMEs during macro economic disasters,their advantage comes with being nimble and can weather any disaster in the economy focusing on better management of scarce resources to survive long enough for the economy to expand and take advantage of the addressable market opened up. Business owners have to figure out the best concoction for the success of their enterprises.

What is myNGOVO?

How many hours a day do you spend thinking about your financial situation?Reading on surviving on a budget?Searching for a better alternative to your current credit options?

What if you could put all that time back on your work schedule?Remember,accessing liquidity to meet your cash flow needs shouldn’t be so draining as the relationship between employer and employee is hinged on trust.It should be straightforward,convenient and also affordable.

That’s where myNGOVO comes in.

myNGOVO is a software platform that puts the financial wellness of workers above all else.Our platform provides employees the efficiency needed to do more with their income.

Available on your mobile device,the myNGOVO platform enables you to access your salary advance with ease.With a click of a button,advance payment is made to your mobile money account instantly.You can access salary advance anytime of the month and you have the ability to request payment more than once while within your limit.Never again waste your energy looking for ways to cater for your consumption needs. There’s no “mwezi iko corner” with our platform.Our platform brings cost savings that would have gone towards repaying costly debt,keeping you organized with your finances and maintaining your purchasing power,allowing you to enjoy essential goods and services in your daily life that you would have cut in order to make loan repayments.

At myNGOVO,we are committed to rethinking and redesigning products that encourage the broader coverage of financial inclusion especially for low-income workers,eliminating inefficiencies that stand in the way of getting serious work done.

Work takes effort,but compensation for work shouldn’t

Learn more about myNGOVO and discover how our financial-wellness platform can help your business in crossing the finishing line.

Reach out to us for inquiries: info@myngovo.co.ke and request for demo of our platform through email: sales@myngovo.co.ke.

How myNGOVO Partnership Will Change Your Business

What is myNGOVO Partnership?

We have moved in a technology-enabled era where most of the mundane workplace tasks are being automated by using software.It used to be work-from-office as the normal but the COVID-19 crisis accelerated flexible working where you don’t have to see your colleagues on a daily basis and videoconferencing with clients miles apart.A study by IWG- a flexible space provider-found that 70% of professionals work remotely at least once a week.

What does this imply for the workforce?

It means that with the fluidity of working from anywhere,we face the challenge of motivating workers through timely compensation for work done while trying to maintain a collaborative and energized workforce.

The answer to this challenge?myNGOVO partnership.

How myNGOVO partnership can Benefit your Firm

Simply put,the ability to cater for the financial well-being of your team will effectively increase their motivation,ability and willingness to work harder in meeting goals and create a positive synergy between departments.

Gain back productive hours

According to a Purchasing Power white paper that examined how employers can improve employee’s financial wellness,44% of full-time employees worry about their personal finances during work hours,which would have otherwise been spent in a productive manner.Financial strain affects both the employee health and productivity.

Improve your company’s bottomline

Employers who adopt financial wellness benefits and programs such as myNGOVO,help employees ease financial stress and be more productive.Hence the employer will get the most out of their human capital.

A better workplace with myNGOVO

At myNGOVO,we’ve been working to be a collaborative partner to employers and to empower employees from inception.Our platform is built to deliver peace of mind and confidence that your firm needs.As a result,you can easily scale your operations efficiently.

While trends and fads come and go,myNGOVO partnership will abound as this is an innovation whose time has come.By leveraging technology,employees can access salary advance payments anytime,anywhere with no complexity added.You can set your employees and your business for success and that’s worth investing in.