She only needed the money to pay the balance, skirt the deadline, and renew her line of credit

She only needed the money to pay the balance, skirt the deadline, and renew her line of credit

When asked to comment on Okash and other apps owned by Opera, and allegations that they violate its rules, Google Play replied only that it had recently expanded its policies “to protect people from deceptive and exploitative personal loan terms,” adding, “When violations are found, we take action.”

For their part, fintech companies say these strategies are simply required to do business. “People misunderstand why we charge the way we do, but it is a complex calculation of risk,” Mutiso wrote in his email. “It usually has to start high as the business has to be able to absorb the losses we are inevitably going to have,” he explained.

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While a user might be barred from borrowing from one because of unpaid student loans, for example, they could still easily get credit from a competitor. As I was reporting this story last December, one of my siblings called to ask for a soft loan of $30, which she promised to repay right away. She had to cover a loan she owed Tala, a Silicon Valley–backed app, from which she planned to borrow again immediately afterward. I knew what her plan was even before she finished telling me about it; many other people were doing the same thing. (I sent her the cash and told her she could keep it.)

In an effort to correct course, in late 2018, Safaricom and two other financial partners introduced Fuliza, an overdraft service, on its M-Pesa platform. The Circleville finance payday loans idea was to restore some legitimacy to mobile lending, and to get rid of the impression that the whole sector was built on sand. Fuliza lets users pay or send more money than they have in their mobile wallet within a certain limit. If users fail to repay the loan within the prescribed time period, interest will begin to accrue at a daily rate, and that amount will be deducted automatically when the person next receives money, regardless of who sent it. The service was a hit – Safaricom users borrowed roughly $800 million in the first six months of 2019 – and Fuliza, which is Kiswahili for “overdraft,” became a slang term.

Of course, as with every other digital-lending product, as soon as Fuliza became part of our reality, Kenyans started gaming it. Several weeks ago, I wanted to place an order with Martin, my bodaboda delivery guy. Martin has two phone numbers. One of them, he told me, has Fuliza, while the other uses a different payment app. So before sending him out on an errand, I called him to ask which number I should use. Then I made my request to the number without Fuliza. That way, he told me, he could accept my money without having to pay back his debt.

“Some [people] sympathized with me,” Kiragu wrote in a Facebook post about the experience. “Some were laughing at me and some were actually very annoyed that OKash is exposing and shaming me . . . Even my boss called me to ask if everything is okay.”

Within a few years, credit-app use had started to spread throughout Kenyan society. Over a 13-year period, financial inclusion jumped from nearly 27 percent, in 2006, to almost 83 percent. And the product side grew as well. As of , according to a report from Financial Sector Deepening Kenya (FSD), the two main app stores offered 110 credit apps.

One big irony of fintech is that as the industry has grown, people have begun to use credit apps against each other, often taking from one app to pay another

To combat OKash’s debt collection practices, some people have started gaming the system. One OKash user told me that she wrote to her entire contact list to say that her phone had been stolen and that they should ignore any fraudsters who might text them. Then she deleted the app. Another posted an audio recording of himself yelling at OKash debt collectors. Others have simply refused to pay back their debts, even after their friends and relatives have been contacted.

Lack of regulation is already taking a toll on fintech in Kenya. In a scathing February report on Opera, financial-forensics firm Hindenburg Research alleged that the corporation was hemorrhaging money and its products were losing users. (The report was released alongside Hindenburg’s announcement that it had taken a short position on Opera.) The publication also criticized what it asserted were the company’s predatory practices, including the fact that Opera’s mobile lending apps in Kenya, Nigeria, and India impose astronomical interest rates on users who don’t repay their loans within 30 days – half the amount of time required under the terms of the Google Play Store. Opera rejected the report as full of “numerous errors, unsubstantiated statements, and misleading conclusions and interpretations.” Yet Hindenburg projects that once Google realizes what is going on, “this entire line of business is at risk of disappearing or being severely curtailed.” In February, shareholders filed a class-action lawsuit against Opera for allegedly making false and misleading statements about their methods and policies.