Pyramid schemes posing as mobile app lenders are on the rise, finacial sector market regulators warned yesterday.
The lenders, the watchdogs warned ask for registration fee from unsuspecting borrowers, promising quick loans and high returns.
Central Bank of Kenya, Capital Market Authority, Insurance Regulatory Authority, Ministry of Trade, Retirement Benefits Authority and Sacco Societies Regulatory Authority expressed concern over the increasing number of unlicensed and unregulated financial products.
‘’We wish to draw the attention of public to emergence of unlicensed financial services. They include online pyramid schemes, credit and saving schemes as well as mobile loan application applications,’’ the bodies said in a statement.
The lenders ask for registration fee and compel unsuspecting members of public to save before qualifying for credit.
The statement said the organisations promise unusually high returns with little or no risk. They rely on fake investment strategies and may require recruitment of more clients to earn points and qualify for more benefits such as bigger loan profile.
They have no registered physical address nor customer care helplines.
An online survey by the Star identified three such mobile lending applications, with downloads ranging between 1,000 and 100,000. This means that hundreds of Kenyans have already fallen prey to them.
Kenya Quick Loan Shop for instance has over 100,000 downloads and charge borrowers nonrefundable fee of 150-200 based on the amount of credit one wants.
Those seeking less than Sh1,500 are supposed to pay Sh150 while a higher credit attracts Sh200 registration fee.
The lending app describes itself as a linking bridge between lenders and borrowers, a perfect definition of modern day shylocks.
Although it claims to have an office at Information House along Mfangano lane in Nairobi Central Business, the mobile phone number provided on its Facebook page is out of service.
Others are Platinum mobile loans and Pesa Upesi with 1000 downloads each and requires one to pay registration fee of Sh200 to be linked to a lender.
‘’We shall not be responsible for any loss suffered by you should the services be interfered with or unavailable. Our loans attracts an interest of 4.2 per cent payable in up to five months,’’ reads a condition on Platinum mobile loans app.
Tala, one of the genuine lending apps with over a million downloads, physical address and functioning helpline acknowledged challenges brought by unscrupulous players in the market.
Regional marketing and communication director Kevin Kaburu said they often pull down fraudsters copying them and thanked Treasury for formulating a financial conduct Bill to regulate the market.
‘’We look forward to collaborating with our industry peers and the government to create an enabling environment for solutions that advance financial inclusion while also protecting consumers,’’ said Kaburu.
Financial regulators have asked licensed financial institutions to be vigilant of any products or services that mimic them and take appropriate measures to protect their customers.
Members of the public have been asked to report entities offering fraudulent financial services to nearest police stations.