Kenyan youth are defaulting on loans at an alarming rate, according to new statistics from the Credit Reference Bureau (CRB).
With 17 million potential borrowers, the youth make up the majority and have discovered innovative ways to circumvent the system in order to obtain new loans while failing on previous ones.
According to the CRB research, youth take advantage of gaps in the sim card registration process to borrow money and subsequently discard the used sim cards. To get around the system, some people change their official information.
Others hide their identities while taking out loans from various lending platforms with no intention of repaying them.
The new techniques being used by the youth to obtain credit, according to Metropol Corporation Managing Director Sam Omukoko, are illegal.
"They take the money and discard their sim cards, then obtain another, borrow, and discard the sim card once more. Some people take out loans but cannot afford to return them, while others take out loans but lose their employment before repaying them "Omukoko expressed himself.
"The CRB lists 19 million Kenyans, 17 million of whom are qualified borrowers, but over 2 million of whom are defaulters and so unable to obtain loans from any financial institution."
According to the data, the most popular times to borrow are between 2 and 5 a.m., with the majority of borrowers being Nairobi residents.
"Between the hours of 2 and 5 a.m., a large number of Nairobi residents borrow money online. We discovered they were small-scale traders at Gikomba market and slum dwellers after further research "Omukoko commented.
While discussing the growing demand for loans, a financial expert pointed out that most young Kenyans rely on mobile money borrowing to get by, adding that individuals with a strong CRB rating will continue to benefit from the lending services.
"The majority of Kenyans borrow for consumption," an economist explained, "and they become significantly indebted in the long term since mobile loans are quite expensive."
President Uhuru Kenyatta ordered a one-year suspension on negative listing with CRBs of debtors with loans under Ksh5 million at the start of the crisis, limiting credit information exchange in the banking industry.
Following the suspension of blacklisting of such defaulters, the Central Bank of Kenya (CBK) cautioned that commercial banks may resume limiting loans.
The suspension was one of the measures used to protect borrowers from the pandemic's impact.
Kenya's economy has recovered after imposing containment measures that resulted in layoffs and wage cuts that cost nearly 730,000 jobs.
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