Study calls for radical change in terms of lending by firms


A study conducted in Kenya and Columbia recommends a change in the requirements needed for one to access financing.

It says that data patterns, web browsing history, social media activity, location information, government records and public data-bases are adequate means that could be used to allow less advantaged people access funds to start businesses.

The study scrutinised M-Shwari, a mobile phone-based loan product.

The outcome says that out of 7.2 million unique customers with its Commercial Bank of Africa-linked savings accounts who benefited from 20.6 million cumulative loans within 24 months of its launch, only 2.2 per cent rate of default was recorded.


“Client data must be treated with integrity and used only for its stated purpose with consent while a commitment must be made by all financial institutions to secure such information.

“Innovators should not fear the disruption to traditional bank underwriting models that these new innovations represent,” reads a report on the study that was released last week.

The survey was done by American based philanthropic investment firm Omidyar Network, established by eBay founder Pierre Omidyar and his wife.

Currently, most consumers are concerned about their identities being stolen or their private information sold to third parties or handed over to government tax authorities.

“Hundreds of millions of mass-market consumers may not have to remain invisible to formal, unsecured credit for much longer,” the report says.

While banks and other loan dispensers demand title-deeds, motor vehicle logbooks, share certificate, surety, pay slips and guarantors, M-Shwari’s success of dealing with virtual clients physically unknown to them has seen more local banks join the fray though cautiously.


The study was commissioned to conduct an in-depth research into customer behaviours and preferences.

About 300 Kenyans living in major cities across the country participated.

Family members, friends, neighbours, and co-operative societies dominate the Kenyan lending market.