Uptake of loans through digital platforms is expected to significantly swell in the coming weeks ahead of the festive season, a new survey shows.
The survey dubbed Digital Loans: Changing Seasonal Trends, by Jijenge Credit claims that despite tough economic times in 2019, December and January could prove to be the months when high spenders turn to online borrowing.
“In the next few weeks, we expect to see an increased number in loan uptake and the demand for such quick loans will continue to increase until the first quarter of 2020,” said Peter Macharia, a banker and the chief executive of digital lender Jijenge Credit.
The lender proposes that the industry watchdog plans for tighter regulation in the digital lending sphere.
The study report calls for increased surveillance in terms of credit checks on borrowers to prove that they can afford a loan to bar individuals with poor credit records from falling into arrears.
Mr Macharia said one of the most popular loans that borrowers are increasingly absorbing is the logbook loan, sometimes getting up to 50 per cent of a car’s value.
Borrowers are risking to take the loan to pay school fees for their children and finance holidays.
“Digital lending is fast and efficient and less paperwork required. The turnaround time is short and as a result, you are likely to see an increase in logbook loans going forward,” said Macharia.
“That is why some regulation from authorities is needed.”
Credit checks are not thoroughly done before disbursing funds.
“Background checks on borrowers are also not thoroughly done like it is the case with banks. Lending to vehicle owners should be specifically put in focus,” he added.
Lack of credit checks has led to an increasing number of borrowers accumulating negative ratings and others losing the vehicles.
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