Shylocks make banks green with envy

‘Get Instant Loans,’ the neon light billboard blinks as we enter the shopping mall.

Then a dozen eyes watch us keenly as we stroll by the stalls.

Soft music drifts from hidden speakers inside the perfumed stalls. This is at the junction of Ronald Ngala and Mfangano Streets in downtown Nairobi.

Having just emerged from noisy streets, the silence here is frightening. The stalls are tiny and in each, there is a man and a woman. They are surrounded by tens of radios, cell phones, TV sets and cameras. It can pass for an electronic bazaar.

But the gadgets are not for sale. Welcome to a shylocks’ den. Here, with any property, you can get instant cash.

Though poorly lit, cash changes hands in a flash. It is a walk-in-walk-out shop for instant loans. No payslips or snoopy scrutiny of your credit worthiness. There are no formalities like in the banks.

Many people are turning to informal lenders for loans, and many others are ruing the day they opted for quick bucks

And this joint is just one of the many strewn across the city. They run discreetly but are quickly taking ground among the low-income earners.

The informal moneylenders rescue many from financial difficulties, especially during emergencies.

From established offices to briefcase proprietors, shylocks are doing brisk business that would make some commercial lenders green with envy.

The lure of instant cash is too hard to resist.

"This won’t fetch anything beyond Sh3,000," Ruffus, a proprietor, declares after scrutinising our mobile phone. The woman beside him chips in: "You will get your phone safe; no need to worry, many people like you come here for help. The interest rate is 30 per cent a week."

There’s cash against anything: from domestic electric gadgets to cars and title deeds. Electronic gadgets are the most preferred collateral because they are easily disposable. Mobile phones are the most popular. The shylocks are even advertising in the classifieds sections of newspapers.

Mr Michael Ochieng’, a gatekeeper, says he was forced to borrow against his cell phone to meet his wife’s medical bill.

"My wife was sick and I did not have money. So I surrendered my phone for a loan of Sh2,000. I’ll repay after 30 days, Sh500 on top," he says.

He says there is no need to hang onto a property when faced with a cash crunch.

Mr Dan Gundi, a contractor, says: "I needed Sh10,000 to transport goods to Western Province and no one was ready to loan me. So a friend introduced me to a shylock. I left a grinding machine worth Sh25,000 as collateral."

But given a chance, Gundi would rather not deal with shylocks.

"Their interest rates are absurd. But this is happening because banks have made it difficult for most of us to borrow. I approached my bank and it seemed uninterested yet the goods were required urgently," he says.

Mr Steve Njenga agrees, saying some shylocks are untrustworthy.

"If it’s something removable they would replace it with a cheap one. That’s how I lost my phone. The police should crack down on them because most of them deal in stolen property," he says.

But most shylocks deny the accusations, saying theirs is a crucial business offering needed services.

Ms Jemimah Mbuthia says shylocks help when one has hit a rock.

"The only problem is they create a culture of debt, which is not good. I have seen families breaking because of people servicing these loans," she says.

Along Lang’ata Road, opposite Uhuru Gardens at a car bazaar, you can easily get cash against your car.

"Most of these cars are collaterals. You surrender the car and documents, and then we give you money to clear your problems. We charge 25 per cent (compound interest) per month," says a dealer, who identifies himself only as Muthanji.

Financial indiscipline

But what brings borrowers to the shylock?

"Two things: Financial indiscipline and poverty," says Pascal Omondi, a shylock in Kawangware.

Omondi and a group of friends started a money-lending venture after discovering many neighbours were always borrowing money. Such groups are numerous in slums.

"We started with Sh15,000 two years ago. Today, the business has grown. Sometimes we are forced to borrow from banks to match the demand. People have problems I can tell you," he adds.

Omondi says the business has high risks, especially with poor repayment. He also says sometimes they are forced to be hard on some clients who refuse to repay.

Another shylock, Mr Felix Okatch, a former banker, says the instant cash is the catch.

"Problems come unannounced. Someone needs cash bail or medical fees. The shylock would be the easiest to approach for instant loan," he says.

And while we established that shylocks are most popular among low-income earners, some blue-collar employees also find them irresistible. In most offices, there is one self-styled shylock. The person clandestinely lends out money, especially in mid-month and on Fridays.

"If only people could learn to live within their means, all these issues would be unheard of," says Fred Chiuri, a Sacco manager.

Omondi says: "We discovered most people hate dealing with banks. They hate the paperwork and the formality, yet they have their daily needs. That is how we fill the vacuum."

Along Tom Mboya Street, we bump into another shylock, Joel Mwangi. He however declines to have his photo taken.

"Most people don’t come back for their properties, so we auction them at the expiry of the agreed period. We don’t have room to keep every piece of junk," he says.

He says most of their clients are lowly paid employees like cleaners, watchmen and cooks.

"But at times we get surprise visits from well-to-do people. Those who earn low salaries are our main clients," he explains.

In Huruma, Nairobi, Jacob Opondo hews a plank of wood, then stops to welcome us. He is a moneylender with tens of thousands of shillings.

Racketerers

When he discovered his carpentry shop would not sustain his financial needs, he turned to money lending.

"I started with Sh10,000, when I discovered people used to come to me and borrow money," he says.

The shylocks are a happy lot since they do not pay tax and do not register their business. A poorly photocopied agreement is all they need to do business.

Yet, some shylocks are bogus and outright racketeers. A victim, Ms Joan Mueni, says a shylock in her neighborhood helped her out one day. She let out her six-foot fridge. But one morning she discovered the shylock had relocated.

"They are crooks. In the first place their rates are ridiculous. Secondly, they would either tamper with your asset or just sell it," she says.

 

 

 

 

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