DIGITAL LOANS

New Google app rules to deny borrowers quick mobile loans

In Summary

•The new Google Play Developer Policy published Wednesday gave affected companies 30 days to comply.

•The new policy is expected to greatly affect the booming mobile lending app industry in Kenya that mostly targets android users.

Tala app, an online financial micro-lending platform, a mobile phone in this photo illustration
Tala app, an online financial micro-lending platform, a mobile phone in this photo illustration
Image: REUTERS

Google now wants all mobile loan apps using its Play Store platform to ensure the repayment period for loans is not below 60 days. 

The new Google Play Developer Policy published Wednesday gave affected companies 30 days to comply.

"We do not allow apps that promote personal loans which require repayment in full in 60 days or less from the date the loan is issued",’’ Google said.

 

It said developers working on personal loan apps need to have data about the loan product in the metadata that allows it to verify the app is not charging astronomical interest, which is common with "payday loans’’

The new policy is expected greatly affect the booming mobile lending app industry in Kenya that mostly targets android users.

Latest data from analytics platform SimilarWeb shows that out of the top 10 free apps on the Google Play Store, four are from the finance category and all of them offer monthly loans.

Yesterday, Tala, the leading mobile lending app in the country with over 500,000 subscribers on Google App Store said it was analysing the policy to check if the new rules will be applicable globally or just in US market.

"We are yet to get any communication from Google. It is not clear if the new policy is applicable in US market or globally,’’ Kevin Kaburu, a communication officer at Tala said.

A spot check by the Star on interest rates charged by two popular digital lending apps shows that Tala charges fixed interest of 11 per cent for 21 days and 15 per or 30 days.

To date, Tala has disbursed over 5.6 million loans worth Sh30 billion to over one million customers since its launch in March 2014 as M-Kopo Rahisi.

 
 

Branch International on other hand has a flexible weekly payment plan under which customers who borrow Sh500 pay a total of Sh76 as interest in four weeks. This is an equivalent of 15.2 per cent per month.

By mid-2017 Branch had disbursed 1.5 million loans worth Sh3.63 billion to 350,000 customers since its launch in April 2015.

The average monthly interest of 15 per cent to an Annual Pricing Rate (APR) of 180 per cent per year, way above a maximum limit of 13 per cent set by Central Bank of Kenya under the interest cap law.

In US, Google do not allow apps for personal loans that charge APR of 36 per cent and above.

Central Bank of Kenya (CBK) governor Patrick Njoroge has insisted that digital lenders are worse than village shylocks.

"At least shylocks hide. These platforms shout about themselves openly while impoverishing Kenyans," Njoroge told the Parliamentary Committee on Communications, Information and Innovation in August last year.

A report on digital lending released by Financial Services Deepening Kenya (FDS) in August last year shows that there are 49 digital credit providers in the country, with a new one launching every year.

The accessibility of mobile app loans risk turning borrowers in Kenya into debt trap, with recent report by FSD and CBK indicating that 50 per cent of households are forced to borrow elsewhere or sell assets to repay loans.

According to the survey, almost 70 per cent of adults aged 18 years and above with personal loans have experienced at least two of those conditions or both, illustrating signs of debt stress.