I read an article that appeared on HiviSasa on "3 things that make merry-go-round chamas lack economic sense" at: https://hivisasa.com/posts/20780372-3-things-that-make-merry-go-round-chamas-lack-economic-sense.
In this article, point #3 reminds me of what is happening with the digital loans where borrower X takes out money from “Fuliza”, a Safaricom lending product, say KShs. 4,000 (we have limits on what one can borrow). This is to be repaid in a month’s time together with interest of say Kshs. 40 (about 1% interest per day, with a penalty and interest if not repaid within one month – the rates provided by Safaricom are Kshs. 30 per day).
Towards the lapse of the one-month period, borrower X decides, using the same digital phone number, to take a KCB M-PESA digital loan of, say Kshs. 5,000 (again, there are limits) with the intention of repaying the “Fuliza” loan, totalling Kshs. 5,375 (interest (they call it facility fee) of 7.5%). This way, borrower X is able to repay the “Fuliza” loan of Kshs. 4,000 and is left with Kshs. 1,000 in savings, not forgetting that he has a Kshs. 5,375 to be repaid.
After a while, borrower X decides to take yet another digital loan, this time the CBA M-SHWARI loan of, say Kshs. 8,000 to repay the KCB M-PESA loan of Kshs. 5,375. The M-SHWARI loan will be repaid together with an interest of Kshs. 600 (total: Kshs. 8,600, a “facility”/interest rate similar to KCB M-PESA loan of 7.5% per month). Mind you, all this time, the annualised interest rate on the KCB M-PESA and MSHWARI loans are 70% to 90% or more.
Now, borrower X utilises part of the M-SHWARI loan to repay the KCB M-PESA loan of Kshs. 5,375 and is left with Kshs. 2,625, and a loan of Kshs. 8,600 to be repaid. The total amount owed to borrower X now stands at Kshs. 5,975 which must be paid to settle the KCB M-PESA loan fully. Given the behaviour of borrower X so far, he is likely to opt for more digital loans such as: Branch, Equitel Eazzy Loan, Equitel Eazzy Plus Loan, Jumo/ Kopa Cash, Kopa Chapaa, Micromobile, Mjiajiri, M-pawa-Sacco, Okoa Stima, Pesa na Pesa, Pesa Pata, Pesa Zetu, Saida, Tala or Zindisha.
The end effect of such an individual is an endless debt state which will get to levels the borrower cannot repay the loan and this is when the threats from the lender begin. Effectively, the borrower has to repay the funds taken with a 6% rate per month (or an annualised rate of 71% per annum. Such an individual, forced by circumstances may end up discarding the SIM Card that he was using and look for another card. This is however, a very short-term solution to an action which may come with adverse longer term consequences.
This is the state most of our (especially unemployed) youth are getting themselves into. Action needs to be taken to create awareness on the longer term effects and consequences of such behaviour.
David Mathuva
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| Courtesy: Daily Nation |
Towards the lapse of the one-month period, borrower X decides, using the same digital phone number, to take a KCB M-PESA digital loan of, say Kshs. 5,000 (again, there are limits) with the intention of repaying the “Fuliza” loan, totalling Kshs. 5,375 (interest (they call it facility fee) of 7.5%). This way, borrower X is able to repay the “Fuliza” loan of Kshs. 4,000 and is left with Kshs. 1,000 in savings, not forgetting that he has a Kshs. 5,375 to be repaid.
After a while, borrower X decides to take yet another digital loan, this time the CBA M-SHWARI loan of, say Kshs. 8,000 to repay the KCB M-PESA loan of Kshs. 5,375. The M-SHWARI loan will be repaid together with an interest of Kshs. 600 (total: Kshs. 8,600, a “facility”/interest rate similar to KCB M-PESA loan of 7.5% per month). Mind you, all this time, the annualised interest rate on the KCB M-PESA and MSHWARI loans are 70% to 90% or more.
Now, borrower X utilises part of the M-SHWARI loan to repay the KCB M-PESA loan of Kshs. 5,375 and is left with Kshs. 2,625, and a loan of Kshs. 8,600 to be repaid. The total amount owed to borrower X now stands at Kshs. 5,975 which must be paid to settle the KCB M-PESA loan fully. Given the behaviour of borrower X so far, he is likely to opt for more digital loans such as: Branch, Equitel Eazzy Loan, Equitel Eazzy Plus Loan, Jumo/ Kopa Cash, Kopa Chapaa, Micromobile, Mjiajiri, M-pawa-Sacco, Okoa Stima, Pesa na Pesa, Pesa Pata, Pesa Zetu, Saida, Tala or Zindisha.
The end effect of such an individual is an endless debt state which will get to levels the borrower cannot repay the loan and this is when the threats from the lender begin. Effectively, the borrower has to repay the funds taken with a 6% rate per month (or an annualised rate of 71% per annum. Such an individual, forced by circumstances may end up discarding the SIM Card that he was using and look for another card. This is however, a very short-term solution to an action which may come with adverse longer term consequences.
This is the state most of our (especially unemployed) youth are getting themselves into. Action needs to be taken to create awareness on the longer term effects and consequences of such behaviour.
David Mathuva
Good articles, Have you heard of Mr Benjamin, Email: 247officedept@gmail.com --WhatsApp Contact:+1-9893943740-- who work with funding service they grant me loan of $95,000.00 to launch my business and I have been paying them annually for two years now and I still have 2 years left although I enjoy working with them because they are genuine Loan lender who can give you any kind of loan.
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