While Kenya is a leader in fintech, a majority, especially in the informal sector, remains unbanked and struggles to access credit for income-generating activities.
This was one of the things that drew MOGO, part of Eleving Group, a multinational financial company operating in 15 countries across Europe, Asia, and Africa, into the country.
MOGO Kenya Head of Operations Karolis Jasinevicius says Kenya, as East Africa's largest economy, offers a good business environment with potential in diverse sectors.
However, there was a gap with a majority of low-income earners being financially excluded. The firm wanted to offer easy access to loan facilities and enable them to make a living.
"We saw a huge population that is underserved with financial products," says Jasinevicius.
At first, the firm offered vehicle financing and logbook loans which were their core business as a group. They soon moved into financing motorcycles and tuk-tuks, which is one of the country's biggest employers.
Jasinevicius notes that Kenya's boda boda sector is a big part of society but financing options are costly and limited.
"When we came in wanted to have a product tailored for them ... we can compare ourselves to renting out a motorcycle. We aimed to offer a product that one would need to pay a similar amount as renting daily with the end goal being to own the asset," he said.
The firm has disbursed over 50,000 loans since it came into the market in 2019.
Bigger lenders fear the informal sector saying it has a riskier profile and would opt to finance customers with steady paychecks.
MOGO aims to be an affordable, accessible and flexible financier at the bottom end of the market.
"When we entered the Kenyan market, we required about 20 per cent deposit which was smaller and many people could afford. Other lenders in the market were asking for about 50 per cent," he said.
Also, most financiers feared touching locally used cars. This is despite the majority of Kenyans being unable to import or buy new ones.
MOGO, which partners with over 400 local dealerships, finances vehicles of any age, brand, or model and customers can choose a vehicle from trusted dealerships through its online car portal.
MOGO saw a gap and started offering up to five-year loans for used cars.
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The firm rode on a "best price guarantee" tag in the market space they were operating and offering the lowest monthly repayments. Jasinevicius says that smaller repayments mean customers have more disposable income to meet other needs.
The firm notes that in light of economic challenges such as inflation and rising fuel prices, they've had to adjust some of their rules in order to help customers repay loans. "We changed our underwriting process to mitigate the changing economic situations to ensure our portfolio is stable we are at the risk level want to have and people we loan to are able to repay," he said.
After seeing changes in repayment behaviour, the firm changed its processes to anticipate that and also keeps doing analyses in order to pre-empt crises. "We have strong systems to follow up on loan repayments and constantly communicate with customers as anything can happen when a person is using an asset to make money."
For them, the asset that is being financed is the collateral. The firm has so far loaned over 50,000 clients to purchase vehicles and motorcycles.
MOGO is also interested in e-mobility which has started taking root in the country.
However, the infrastructure, for example, in terms of dealers, charging points and mechanical experts are still young. MOGO financed its first e-motorcycles last year and says the uptake is slow.
The e-motorbikes also tend to be expensive but are economical in the long term owing to low servicing and maintenance costs.
"For riders, they are cheaper to operate but the barrier to entry is higher. We wanted to mitigate that and changed our product offering to make those loans cheaper and one pays the same weekly amount as you would when purchasing an ordinary motorcycle," he said.
Recently, MOGO launched a financial literacy tool aimed at educating its Kenyan clients about personal budget planning and making informed financial decisions.
The financial literacy tool is meant to give consumers a complete real-time overview of their financial lives and wellness through a single digital platform. Users will have access to financial education and personaliSed spending management through the tool based on their actual situation.
"Financial literacy not at the level it could be in Kenya. Many, especially, low-income earners are struggling with it and we want to help them make better financial decisions even when paying loans," he said.
The demand for motorcycles has seen the market flooded by hire purchase companies seeking to make a financial killing. This has led to predatory lending which is leaving low-income earning boda boda operators worse off.
Jasinevicius says that MOGO offers productive lending which is getting a loan to generate an income.