In the last one year, Commercial Banks have seen quantum growth in the number of transactions and amount of loans processed via mobile channels.
A sample of three tier-one banks shows mobile has outpaced and completely dominated traditional banking halls in terms of transactions.
Equity Bank, for instance, issued 3.5 million loans through its mobile platform compared to 400,000 from the branches in nine months to September 2016, with Equity Bank CEO saying the bank is getting 50,000 mobile loan requests per day.
At Kenya Commercial Bank, the number of mobile accounts grew by 98 percent from 4.3 million to 8.3 million in one year, disbursing Sh17 billion in mobile loans.
Co-operative Bank’s mobile platform MCoop cash loan book grew by 130 percent as customers on the platform surged by 20 percent.
The high uptake of mobile-based financial services, which has diminished security-backed lending, has ushered in the era of reputational collateral, backed by data analytics.
The implication of a data-driven decision-making process is that financial institutions have a better and faster way of assessing risk when issuing loans, with the ultimate aim of varying terms of a credit facility on the strength of a credit score.
One CRB agent, who spoke to Capital Business, cautions people who buy SIM cards for relatives and friends.
“Loans borrowed using the mobile number will be registered under the one who purchased the SIM card and not necessary the person actively using the line,” said the agent, who requested not to be named.
But it’s not all lost for customers who have a negative credit score.
“A negative listing does not bar one from accessing credit, however, some customers in this category may have lower chances of accessing credit since some lenders have policies not to lend to over-indebted or routinely defaulting individuals,” explains Everlyne Silong, CISA Communications Manager.
In addition to determining whether or not a customer gets a loan, financial institutions are now using credit scores to set limits on the amounts disbursed to an applicant.
“This is particularly useful to the small-scale borrowers and SMEs who often don’t have collateral to secure loans. As a result, credit information sharing has afforded credit to many, hence facilitating financial inclusion. Having your name at the CRB is not bad after all, it is better than not being listed at all.”
