A few days ago, it appeared that many loan apps were functioning normally, with their tools live on the Google Play Store several months after Alphabet detailed a set of regulations for financial apps. The rules instructed mobile lenders to disburse loans with a repayment period of at least 61 days and charge no more than 36% interest.
Of course, we expected that the companies involved would not comply due to the design of their business – they offer unsecured loans using data from a customer’s phone. The exercise does not require any paperwork (however, it has become more and more common to ask for identifying information such as national IDs and pictures for security reasons), so it is very attractive to many. people, but makes it very expensive for them because that trust has to pay off.
Google’s new policies are driven by the need to protect users from exploitation by these apps. For a long time, mobile credit services have made huge profits by charging astronomical interest rates because, well, they give money to strangers and have to cushion the risk by charging high rates within a strict time frame. and short.
The same concerns echoed locally. CBK, for example, has since admitted that he needs a strong framework to regulate online lenders. The discussion has been going on for a very long time without significant developments. It’s a shame that Google was forced to tame the space in a situation where local financial institutions could have tackled the chaotic and lucrative nature of these apps long ago.
Didn’t Google apply its regulations?
While the rules were in place over five months ago, the mobile lending space hasn’t changed as much, at least for the most part.
We say this because countries like Kenya have dozens of loan applications that have unfairly benefited the poor because, well, the sector is barely controlled, and Kenyans have a natural appetite for quick loans – but can you blame them?
Kenya is also cited because it is one of the few countries where mobile money has taken off. Most mobile lending companies disburse their funds through M-PESA, which eliminates many steps such as sending the money to a bank account and accessing a bank to withdraw it. Only the success of loan applications, among other fintech products, is linked to the existence of M-PESA.
The other day Norwegian society Opera running a browser was in the hot seat when it emerged that he was running loaner apps that violated Google’s regulations.
Okash and OPesa are based in Kenya. Okash is the most popular and is known to limit loans to fifteen days for the basic loan (KES 1500). Many people have expressed their complaints to no recourse.
A few days ago, Opesa disappeared from the store of what we believe to be an action initiated by Google. A few hours later, the app reappeared with revised rates and repayment periods. The same development was noted for Okash.
Customers have also raised concerns that the app will give you a 61-day refund window, but hassled you with a different refund plan via text message. If this is true then it is a questionable approach to doing business and is likely to lead to many angry conversations.
Branch, arguably one of the largest lenders in Kenya, has been offering flexible repayment periods for some time now. The company further claims the 61-day period is one of its options, but adds that customers can choose to pay off their loans earlier if they want (a shorter window comes with lower rates). It fails to say, however, whether it will eliminate shorter payment terms and revise interest rates under Google’s rules.
Tala operates in the same way as Google and claims to comply with Google policies. Still, customers have the option of paying off their mobile loans after two weeks, a month, and so on. This, of course, does not make sense because Google strictly advises to extend the period to at least 61 days.
Many other mobile lenders have changed their changelog to indicate that they have followed the new strict policies. As we have indicated, some statements are there for the sake of view, but in reality clients cannot borrow more than two weeks.
More work for Google
Google has the ball on its ground. It’s appalling that these apps can play with politics and sneak into the Store in front of the search giant.
It’s also likely that Google will go the extra mile and kick all the nifty lenders out of the store. But knowing how lenders make money, a lot of them are going to lose substantial income because let’s be honest they are feeding off vulnerable customers who use their services because banks can’t give them money. It’s a development we don’t know how it will play out if Google revitalizes its position and authority over rogue lenders.
Mobile lenders have also seen thousands of Kenyans enrolled in CRB for as little as KES 200, making it even more difficult for them to access loans. They also need more money to restore a good credit rating.
Google’s financial policies serve as a one-stop-shop to bring some sanity to the mobile lending space. However, more work needs to be done locally by lawmakers who will hopefully craft a framework that will genuinely protect users from exploitation.
Traditional banks also provide loans through mobile platforms, and while their rates are admirable, they still limit payment windows to around a month. True, their products are not considered “mobile”, but legal support that controls their operations is urgently needed.