While chatting with friends on social media on Wednesday, Ann Nyaboke saw a message pop up on the screen of her phone.
She stopped the chat and read the message, which was from a new digital credit app asking her to enroll by downloading the software.
Not someone to fear experimenting, she followed the steps offered and downloaded the app and borrowed 1,000 Kenyan shillings (about 10 U.S. dollars), the maximum she could get.
“I had not enrolled in any digital loan app before, but I could not leave this chance to pass out of curiosity because it popped into my space,” she said. “It is the easiest money I have ever borrowed.”
Her experience is shared by hundreds of other social media users in Kenya as developers of the apps intensify their hunt for customers through Facebook, Twitter and Instagram.
The digital loan apps are mainly advertising on social media as they target the youth in the east African nation, who form the bulk of those who use the sites and borrow cash via the app.
“Apply for the first loan of 500 shillings now! Get loan, make the back payment in time and get another loan of up to 5,000 shillings,” one app offers on social media.
“Instant loans to your Mpesa account. Download our app today and borrow as low as 100 shillings to 50,000 shillings without any guarantors, security or office visits!” another app says in an advertising message.
“Gone are the days when customers applied for loans, which would months to process, in the banking halls. Get the right mobile lender today. It’s a digital world,” offers another digital loaner.
Kenya has more than 50 digital credit apps that offer borrowers instant loans depending on their mobile money usage. A majority of the apps are standalone products but commercial banks have lately joined the foray to cash in on the boom.
The apps offer loans at an interest rate of up to 15 per cent per month, which is outside the controlled Central Bank of Kenya lending rate of 13 percent per annum that formal banks offer.
So popular are the digital credit apps that in the last months, banks and non-banking actors have scrambled to launch new services, with social media offering the easiest platform to advertise themselves.
Mathew Muthuri, a social media marketer in Nairobi, notes that most of the apps are exclusively using the sites to advertise their services because of the huge reach and they enable them to target individuals.
“Unlike TV, newspapers or radio, which reaches to generally the mass market, social media reaches millions at once but each person receives the message individually on their phone at any time. It may even be in the dead of the night. They are, therefore, likely to take up the service without seeking opinion from anyone,” he said.
The 2017 FinAccess Digital Credit Survey showed that 35 per cent of Kenyan phone owners are digital borrowers, an indication that some 6.1 million people use the apps in the East African nation.
These are mainly the youth, who also are active users of social media sites.
Muthuri noted that social media advertising has worked for the loan apps, the reason why millions have enrolled for the service, some taking loans from up to 10 service providers.
However, as the popularity of the apps soar, Kenya’s financial sector regulators have warned that increased usage of digital credit exposes the economy to various challenges that include money laundering.
“Digital credit predisposes the economy to risks that include money laundering, terrorist financing and technology risks,” said the Central Bank, Capital Markets Authority, Insurance Regulatory Authority, Sacco Regulatory Authority and Retirement Benefits Authority, in a report released last month.