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Digital lenders urged to share data to curb default rate

Digital lenders urged to share data to curb default rate

Digital mobile lenders have been challenged to share data with each other to curb the rising default rate by their customers.

Experts in the industry state that the default rate might range between 8% and 15%.

Speaking at the Seamless East Africa 2019 summit, Denis Kuria, analytics manager at Mobipesa said that this lack of sharing data results in one customer defaulting on several loans, increasing the default rate.

"Sharing data between the lenders will actually change the market," Kuria said. "The reason why the default rate is going up is because the digital lenders are putting the borrowers in a debt trap. You find that you can take loans from nine different digital lending companies."

He said that most of such borrowers find it hard to honor the payment date of all loans. "The loans may even double ones income," he added.

Ivan Mbowa, regional general manager of Tala Kenya, said that the measurement of the default rate for mobile lenders should be different from established banks. Banks usually classify bad debt if it hasn't been serviced for 3 months. For digital lenders the repayment period is usually a month.

Mbowa said that Tala collects up to 10,000 data points on its borrowers including social media data, device data and what apps the potential borrower has installed. All the data collection are governed by a data privacy policy, he added.

"We need to empower our CRB (credit reference bureau), to be doing more than just reporting who has defaulted and the loan amounts," added Waruguru Ituu, Founder, Change Corner Kenya.

She said the CRB should look at the whole spectrum of lenders with oversight from government.

There is need to have good data even on those who have not taken any mobile loans, she explained.

Kuria said that most lenders are afraid to expose their good repaying customers to other digital lenders and hence the need to only report the negative reports. He was however confident that the young Digital Lenders Association of Kenya (DLAK) will find common ground on sharing of data.


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