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Where Credit Is Due

by Tullah Stephen

The rise of technology has allowed fintech companies to offer alternative to traditional lenders. Now this firm wants to offer credit to everyone regardless of their status

Like many others, Mary Wafula a small scale trader in Nairobi’s Kenyatta market, struggles with economic slump, growing supplier pricing as well as access to finance to sustain or even grow her business. For small scale traders like Wafula who have very little or no savings, rainy days are all about borrowing money from friends or lending institutions such as banks or credit unions.

But, banks and credit unions have been reluctant to approve any loans for small businesses even those that are considered stable. Their main argument has been that such businesses are risky and often don’t offer many returns.

The reluctance to offer loans to small business or personal loans by banks and credit unions has seen a number of fintech companies come in to save the situation.

Buoyed by the growing mobile and internet penetration, fintech companies are developing products geared towards providing digital loans to the lower cadre population. One such company is Okolea International Limited.

Okolea, is a finance company offering digital loans, money transfer, digital payment and accounting software. According to the companies CEO, Peter Muraya, the company’s goal is to leverage on existing and emerging technologies like artificial intelligence and virtual reality to power innovative financial solutions and improve the day to day lives of people.

“Our goal is to offer loans to everyone without prejudice. We believe no one should be discriminated against regardless of their social class.”

Digital lending products have been growing in popularity over the last few years. They have been known to offer smaller amounts of loans compared to micro-finance institutions.

Customers accessing higher amounts mostly invest into business while those qualifying for smaller loans often spend on consumption, emergencies and recurring expenses such as rent.


Peter Muraya CEO, Okolea International Limited

“One of the key things we have been focusing on has been quick turnaround time. The ability to get loans instantly without documentation at any time is what Okolea appealing to the market.”

For one to qualify for Okolea instant loan, all they have to do according to Muraya, is to download the app on android play store. Once, you have downloaded, you pay facilitation fee of KSh100 to access loans. The facilitation fee according to Muraya is meant to enable the company carry out a due diligence process and check applicants credit worthiness.

“This amount is to enable us conduct a background check on the borrower’s details and status from the Credit Reference Bureau (CRB).”  Once the process is complete, the borrowers can access as little as Ksh150 and a maximum of KSh100, 000. Loan limit increases with the applicant’s ability to pay previous loan.

According to Muraya, the company like most digital credit companies, relies on mobile based data such as users M-Pesa transaction records to determine their credit score and loan amount.

The annual percentage range from 20 to five per cent based on the repayment period for the borrowers. Repayment period is within a month.

Those that default on their loans are blacklisted by CRB and locked out from further accessing loans. This does not only apply to loans from Okolea but other digital credit companies.   Research by Microsave an international financial inclusion firm show that about 2.7 million Kenyans have been listed in the last three years. Out of these over 400,000 have been listed for amounts less than USD2.

Since inception, Okolea has been able to disburse over 500, 000 loans to its 80,000 registered members. The average amount of loan according to Muraya is KSh1200 though this figure could change in the future.

Muraya says the busiest months for the lender is during the months of January and February. “During this time people are looking for money to take their children to school after spending most of their cash on Christmas holiday. “

Kenya has more than 20 digital credit offerings with the number growing every day. This Muraya says is fueled by a growing demand for instant loans as well as the increasing popularity of mobile money transfer services.

Mshwari is currently the most popular providing both savings and loans through M-Pesa platform. Others include California backed digital lender Branch, Equitel, Tala and Saida.  A growing number of loans issued with Mshwari at 63million, KCB Mpesa at 4.1million and Equitel at 3.6million.

Similar to Okolea, these apps allow users to download the app then link it with their social media accounts. The app the uses algorithms to analyse data from the user’s handset to determine their credit score.

Industry data show that 90 per cent of loans in Kenya are currently disbursed via mobile phones. Data from the Central Bank of Kenya indicate the volume of cash moved through mobile money transfer platforms in 2016 grew by a fifth to cross the KSh3 trillion mark.

Though these services have offered a solution to one of the teething problems to the common man. They have not been without challenges.

The default rates are high, says Muraya.  “Most people fail to pay their loans out of ignorance, some see the loans as too little for lenders to follow up.”

There are also cases of multiple borrowing. Over time with the growing number of products and services, it has been difficult to know how many other loans borrowers have taken. This means borrowers taking more credit than they can manage. It is common for borrowers to take up a loan to pay another.  This creates a debt cycle that in the end increases their default rate.

For Muraya and his team, the target is now set on growing the company’s market share. This he says will be through offering products that resonate with the market demands and trends.


Please Note. On our print edition we indicated that facilitation fee was Ksh150 and the repayment period to be 12 months. This has since been corrected in our online version to reflect the true figures. The facilitation fee is Ksh100 while the repayment period is within one month.

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