How digital lenders can help our ailing economy recover

Digital Lenders Association of Kenya (DLAK) Vice-Chairperson Ivan Mbowa, Chairperson Kevin Mutiso and Treasurer Irshad Muttur during the Association's AGM. [File, Standard]

It was a baptism of fire for many Kenyans when President Uhuru Kenyatta announced travel restrictions at the onset of the Covid-19 pandemic in 2020. Jobs went with the wind, savings in the education kitty went to the grocery, and majority of low-wage workers bore the brunt of the slowed economy.

Things have been getting better, thanks to the vaccine and increased knowledge about the virus. The economy is looking up, and with the removal of the 19-month long curfew, there is optimism for recovery. The World Bank projects that Kenya’s economy will grow by 4.5 per cent in 2021. More robust growth is expected in 2022 as most sectors like education and tourism, enjoy an acceleration to normalcy.

The next phase of economic recovery will need an optimised participation for many people who have been struggling to make ends meet. This creates an urgent need for micro-lenders to open the purse and extend loans.

The digital lending sector can provide a major boost. With the government’s backing and other stakeholders, the sector can give Kenyans an opportunity to start small businesses, revitalise ailing ones, and level up to pre-Covid standards.

On the micro-lenders, streamlining lending requirements can ensure the lending process is reconciled to current economic realities.

Thus far, some companies have shown proactivity in this area. Zenka, one of the leading lenders, has been extending moratoria to borrowers. By allowing them more extended repayment periods, giving them opportunities to postpone payment, and using borrower history to gauge future relations, the company has shifted the industry from a harsh lender-borrower relationship to a positive and symbiotic relationship that is customer centred.

Micro-lenders can also help the economy by increasing disbursements to borrowers. Understandably, many financial institutions had to cut back on lending during the pandemic. Again, there is hope in this area as we have seen some lenders like Tala raise new capital, meaning they are looking at a robust post-Covid situation that will see many unbanked Kenyans reclaim their financial capacitation.

The country can explore more opportunities in the digital lending industry to move from the current hot and cold relationship to a more cooperative and collaborative approach.

The writer is CEO of Zenka.