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DIGITAL LENDING

Making life easier for borrowers

In Summary

• Okolea has embraced the duplum rule, ensuring interest for late payments does not exceed the principal amount

• The company has also lowered its interest rates to a minimum five per cent for those who pay within two weeks

Okolea
Okolea
Image: COURTESY

Getting credit has become a big challenge, especially using conventional ways such as banks and saccos. For one to get a loan with a sacco, they have to save with them for a period, have collateral, guarantors and a credible bank statement.

It's quite difficult for those who work in the informal sector like the jua kali to meet these requirements.

Digital lending has come to make Kenyans' lives easier. With just a mobile phone, a registered sim card, and a national identity card or a passport, one can access a loan of between Sh100 and Sh100,000. The rising number of digital lenders has brought about convenience, one is able to access loans regardless of time or location.

This is why digital credit is gaining traction. Digital lenders innovate and use different metrics to weigh the creditworthiness.

There are more than 45 digital lending platforms in Kenya today.

Okolea International Limited, a homegrown company, has taken up a huge role in the digital lending market by ensuring that everyone who is in need of a loan and meets the company’s requirements gets one in a matter of seconds. A client's limit is increased every time repayments are done on time.

Okolea is one of the first digital players to embrace the duplum rule, ensuring interest for late payments does not exceed the principal amount. The duplum rule is a common law rule that provides that arrear interest ceases to accrue once the sum of the unpaid interest equals the amount of capital outstanding at the time and not the amount of capital originally advanced.

This allows one to borrow only the amount they are in need of and still have a balance on their limit which they can borrow at a later date. The maximum duration of repaying is a month.

Since digital borrowing terms are very attractive, most people end up borrowing loans without a purpose. This has made many Kenyans have a negative rating with the Credit Reference Bureau, making it difficult for them to access credit from other lenders.

Okolea acknowledges that some customers might not be in a position to clear their loans within one month, that is why the company provides a renewing option. This means that a client pays the interest amount only and the repayment period is extended to another month.

The company has also lowered its interest rates to a minimum five per cent for those who pay within two weeks and a maximum 15 per cent from its previous high of 20 per cent for one month.

Okolea recognises that having rates fixed per month is detrimental to the welfare of the customer since some pay before the month ends. This has led to introduction of interest bands, which depend on time repaid, thus passing benefits to those who pay early. The interest bands are five per cent for those who pay within two days, eight per cent for one week repayments, 11 per cent for two weeks, 13 per cent for three weeks and 15 per cent for one month.

The opportunities in the lending market continue to increase by the day. The ability to offer a diversified range of financial services on a single platform will serve as a competitive advantage for market participants.

Okolea is now in the process of setting standards in the industry through features that seek to promote responsible lending and to protect consumers from exploitation.

This will ensure that customers can continue to get access to working capital and emergency funds instantly through the ever-improving Okolea App. To access Okolea just go to Google Play, download the Okolea App, register and borrow instantly.

“Okolea recognises responsible lending is key for sustainable growth and launched multiple loans to ensure clients borrow only what they need at a time. This feature has proven popular leading it to be adopted now by leading banks and telecoms.” asserts Muraya, Okolea CEO.