MONEY TALKS: Trapped in vicious cycle of mobile loan apps

I’ve been borrowing money from Tala.

You must know Tala, formerly Mkopo Rahisi? You download the app from the play store, ask for money – as a short-term loan, or emergency credit, as they colourfully put it – and the cash is sent to your M-Pesa in the snap of a finger.

There’s no security on the loan. Rather, there seems to be no security on the loan. But there is, we’ll get to that in a minute.

Aside from Tala, I’ve also been borrowing from Branch (it works almost like Tala). I’ve also borrowed from an instant-loan facility my Sacco has called MobiLoan.

And from my other Sacco as well, with a similar facility.

Look, I’ve been whoring my borrowing around, OK? And I’m not proud of it.

The first loan I was took with Tala was in the tail end November 2018, we’re now in February. I’ve taken far too many loans than I’m willing to tell you about.

Here’s what my experience has been like thus far.

THE GOOD

My access to credit has been maturing healthily.

Let’s take Tala for example. When I signed up to the app, they told me I could borrow Sh5,000.

I felt good about that. I felt that I was worthy of their business, and they mine. That we could speak in the same language. And that we’d never knock heads out of petty pickles. You know how you shake hands with a business partner and you get the feeling that you’re going to have a good long run together? That’s how I felt with Tala.

I’d have been insulted if they told me I could only borrow, say, Sh1,500 or something in that neighbourhood.

Branch told me I could borrow the first time Sh3,000.

Anyway, so I borrowed that Sh5,000. They told me I could pay it back either in 30 or 21 days. I chose 21 days. My interest rate was 11 per cent, I’d have to pay back Sh5,550.

Of course, depending on how my pocket echoed, I could settle any time before those 21 days maxed out. Either some of it or all of it, my choice.

Repaying on time meant building a good credit history – I could borrow bigger loans on lower rates.

Here’s an example: In November, as a silver-status member, I borrowed Sh7,000 and paid it back with an interest of Sh770; that’s a rate of 11 per cent. Now I’m in gold status; I can borrow the same Sh7,000 and pay back at 8 per cent, that’s interest Sh560.

Shylocks lend for 30 days at between 15 and 25 per cent.

One of my Saccos has a facility called Mobiloan – they lend you Sh10,000 (nothing more, nothing less) for 30 days at a rate of 5  per cent.

My other Sacco lends a maximum of Sh5,000.

One last thing I also liked is that I moved status steadily as my emergency cash needs grew: my first loan in November was a maximum of Sh5,000. By the fourth loan in February, I could borrow above Sh10,000.

There’s a lot Sh10,000 can do for you when you really need it.

THE BAD

These apps say the loans are unsecured but that’s not entirely true.

You are your own security. If you don’t pay on time, you are charged exorbitant rates on the entire unsettled amount (I don’t even want to know what these rates are).

If you pay on time, clap clap, bigger loans on lower rates.

You determine how far these facilities will sort you out.

Of course, there are the passive-aggressive text messages to remind you to settle your loan on time... They won’t let you sleep well at night.

THE UGLY

My intentions to borrow were noble but it all went downhill too fast for my liking.

As I mentioned, first I was borrowing as part of research for this column.

The first Sh5,000 I borrowed sat in my M-Pesa untouched for three days. I sent it back with interest then borrowed Sh7,000. I did the same thing, but not with all the money – I sent back Sh5,000 after a few days then used the balance for something else. I don’t remember what, I think it was to buy meat from my butcher at City Market.

It’s at this immature stage – three loans in – that I realised these apps could rescue me should I ever be stranded somewhere and didn’t have cash on me. Of course I could call GB, my hubby....but these apps, unlike him, won’t ask questions I can’t answer.

These apps only need to know what I’m using this money for, what I used the last money I borrowed for and whether I have other loans outstanding. Simple, standard questions with simple, standard responses.

Would they know if I wasn’t completely honest with them, told a little lie? Maybe, maybe not. I don’t know.

Anyway, my third loan was no longer for research but for my side-hustle.

I run a small business and was having cash flow issues – cash was tied up with customers who hadn’t settled on time; what accountants call AR, accounts receivables. This was affecting my liquidity and my ability to buy more stock. (This liquidity deadlock happens with almost all businesses. It’s known as working capital issues. These apps advertise themselves as an emergency-credit solution for this working capital deadlock.)

I borrowed money to keep the business moving, and my clients happy.

By the time I got to the fourth loan, I was abusing the credit. I’d use a little bit of the money for my business, and most of it for my personal expenses. I borrowed Sh15,000 in late Njaanuary, that long stretch before salary finally checks in. I’m too embarrassed to tell you what I used the money for.

There was even a time I declined a loan offer. I whined to them that it’s too low.

THE REALLY BAD AND REALLY UGLY

These apps have enabled my new habit of living off bad debt.

Lately, I’ve found myself borrowing from one app to settle a loan from another app, then get more money to settle the other loan I took for this loan. Ha-ha. It’s sick!

There were other occasions where I took a loan without a plan on how I’d pay it back.

Of course this has nothing to do with the apps but with me as a Kenyan in need of instant cash. I’m abusing the facility. I’m becoming a lazy thinker. I’m not harnessing the power of broke. I’m reaching for the easy, immediate and temporary solution.

Look, I don’t know how much I’ve borrowed in total, OK? It must be approaching the neighbourhood of Sh70,000. I’ve paid interest of close to Sh10,000.

I’m looking at these figures and asking myself the question everyone borrowing should: how can I get out of this vicious cycle, once and for all?

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