Boda boda demand drives youth to take costly loans

Critics describe as exploitation the hire purchase schemes through which boda boda riders pay daily instalments to own motorcycles.

The instalments can be as low as Sh350 a day. In two years, the boda boda rider will own the motorcycle but will have paid almost double the showroom price for it.

Despite the high prices of buying through hire purchase, the arrangement is wildly popular in the boda boda industry. “Most people don’t have Sh120,000 in cash for a new motorcycle,” John Babu, a boda boda operator at the Coast, explains.

Babu, 35, paid a deposit of Sh15,000 in February 2021 for his motorcycle. He opted for a one-year, Sh500 per day instalment plan. This March, he will own the motorcycle after paying a total of Sh197,500.

One may opt for a lower instalment plan of Sh300 a day, but the payment period will extend to two years. With an initial deposit of Sh15,000, the boda boda operator will pay Sh234,000 to own the motorcycle.

Babu says paying in instalments is better than renting a motorcycle. “To do boda boda business without a motorcycle, you must hire one for Sh400 a day,” Babu says. “In one year, you will see the owner of the motorcycle buy another as you continue giving him money!”

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The rather high overall payments in the hire purchase schemes have been described as exploiting the poor. Hire purchase companies deny the accusation, saying they are helping low-income earners own assets that will generate wealth.

Mogo Kenya, one of several hire purchase companies in the local market, says their model gives people an opportunity to own assets they otherwise would have rented. In an emailed response to queries by this writer, Mogo says it found boda boda operators were paying Sh500 a day to rent new motorcycles. Old motorcycles were going for Sh300 a day.

“For a daily payment of Sh348, having paid the minimum down payment of Sh15,000, a customer can save up to Sh100,000 in two years compared to renting the same bike,” the company explains.

A quick calculation shows that hiring a new motorcycle at Sh500 a day will cost the boda boda rider Sh365,000 in two years. Through hire purchase, a boda boda rider paying Sh348 daily will own a new motorcycle for Sh269,000 in two years. With a Sh500 daily plan, one can own a new motorcycle in one year for a total of Sh197,500.

Mogo says critics do not have a complete picture of their packages. “We pay for the motorcycle’s insurance and GPS tracking during the loan period without charging the customer,” reads their statement. Babu, the boda boda rider, confirms that hire purchase companies include comprehensive insurance in addition to providing two helmets and reflector jackets.

Babu has just a few weeks left to fully own his motorcycle. A prospective buyer wants to buy the one-year-old machine for Sh70,000. Babu says he will sell it and buy a small plot of land for Sh50,000. The balance of the money will go into the deposit for a new motorcycle on hire purchase. “I want to build a house and not worry about landlords,” Babu says.