INTERVIEW: The future of digital economy with Peter Macharia, CEO Jijenge Credit

Qs. In the last few years we have seen potential misuse of digital loans coupled with extensive negative reporting of borrowers who have failed to repay these relatively small loans has raised a growing concern about their design and the adverse impacts they have on borrowers, how bigger concern is this to not only companies giving out such loans but also for the country’s financial system?

Ans.   Higher debt levels as the digital loans can be accessed by almost anyone. Credit worthiness also reduces, due to negative credit listing, which means these borrowers can’t access bank loans for Business expansion or asset financing.More employers and rental agencies are requiring credit checks before hiring or leasing therefore certain types of employment or living situations may be negatively affected.

Qs. Do you believe the sector is sufficiently supervised as is the case with banks or insurance sector?

Ans. NO it’s not. Credit checks are not thoroughly done before disbursing funds. Background checks on borrowers are also not thorough as with banks.

Qs. Are you certified with the current set of laws and regulations governing the subsector?

Ans. Partly No because we do not collect deposits from the public and partly Yes because we have letters of no obligation from CBK.

Qs. Given the sector’s fast-pace growth in the last five years, how and where do you see the sector in the short-to-long term future?

Ans. The sector will grow exponentially as the demand for loans will continue to increase.in addition, the digital sector is fast and efficient and less paper work required. Also the TurnaroundTime is short.

Qs. With the growing number of companies venturing in this space, should the existing firms be worried? Would this in anyway lead to an oversupply of sorts in the market? If this happens is the market ready to accommodate the expected gush?

Ans. No. The existing firms have the advantage of being in the market longer. They have tried & tested various business models, thus have a better standing.

Qs. Where do you see the future of log book loans?

Ans. More vehicles are being imported into the country on a daily basis leading to more vehicle owners taking logbook loans which is made possible by asset finance loans.

Qs. With the proposals to amend interest cap rates in the offing, do you believe it will in anyway have significant impact on digital lending?

Ans. Yes. The loan uptake will decrease, as borrowers will have been discouraged to repay their loans with high interest rates.

Qs. What do you feel has been the greatest challenge for digital lending and companies in the business of lending against log books?

Ans. The default rate for digital lending is high, while in the case of logbook loans, the resale value of vehicles is decreases, as the vehicles depreciates in value fast.