1.3. Definition of terms
“Credit policy” means a general framework approved by the board that spells out and guides the bank’s credit/financing strategic directions and credit /financing decisions.
“Credit Scoring” means judging/evaluating the creditworthiness of a customer based on basic characteristics and past performance in credit and other relationships with Bank.
“Digital Micro Credit” means micro loans that are requested, received and repaid all through mobile phones (or any other appropriate tools) via interaction with a computer system.
“Digital MSL Policy” means a policy document that governs the management of digital micro saving and credit services.
“Fixed Account” means a saving account locked for a certain period, a minimum of three months, based on the preference of the customers to fulfil their designated plan.
“Lending officials” means any person involved in MSL business of customer acquisition, Credit Worthiness evaluation, Credit operation, Collection, monitoring and decision-making as well as write off and post write off follow up process.
“Loan Pricing” means setting the interest rate, fees, commission, and others to be charged by the Bank on loans, advances, and guarantees extended to customers.
“Retail and Micro Business Segment” means a category of customers having less investible asset, trading transaction and return from business.
“Micro loan” means a small amount of loan availed to micro businesses and individuals for the purpose of supporting businesses and consumption.
“Micro Saving” means a saving scheme designed for small deposits from micro businesses and low income individuals
"Micro business customers" means customers having less investable asset, trading transaction and return from business. They represent the lower class of wholesale banking customer segments of the Bank.
“President” means the highest-ranking executive officer who is primarily responsible for the day – to- day management affairs of the bank;
“Target Account” means a saving account that allows the customers to set target for a minimum of three months and make deposits towards achieving their target
“The Bank” means the Commercial Bank of Ethiopia.
Agent: Shall mean a person engaged in a commercial/business activity and has been
contracted by the bank to provide the services on its behalf.
Financial Transaction: shall mean an event which involves money or payment, such as deposit money into a bank account, borrow money to customers.
Merchant: shall mean an entity that contract with an acquirer to originate transactions and accepts cards for payment and displaying bank’s and the issuer's logo.
Mobile Money System (MMS): shall mean performing banking activities which primarily
consists of opening and maintaining mobile/regular accounts and accepting deposits;
Furthermore, it includes performing fund transfer or cash in and cash out services using mobile devices.
Personal Identification Number (PIN): shall mean a secret numeric passwor
3. Over 6m Kenyans have borrowed at
least 1 digital loan
Usage of non-regulated digital credit
has grown from 0.6% in 2016 to 8.3%
in 2019
High uptake but less clarity on the
size and composition of the supply-
side
New entrants from outside the
prudentially regulated sectors have
emerged
.
NB: Formal borrowing: includes digital borrowing as well
Growth of digital borrowing (%)
4. 4
FSD
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Creating
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Proliferation of lenders has increased attention to wider consumer protection issues
1. Data privacy and ownership is starting to emerge as a concern: (mining, storing and sharing
consumers’ digital footprints)
2. Emerging signs of debt-stress: mobile loans rank second in the proportion of defaulters by loan
types
3. Nothing like a small debt: law permits listing non-performing loans with CRBs yet only 30% of
Kenyans are aware of CRBs
4. Long-running debates on cost
Loan defaulters from credit types: FinAccess 2019 Levels of debt stress(%): FinAccess 2019
6. • CGAP & FSD published a paper in 2018 looking at the demand-side of digital credit
• FSD incepted work in 2018 looking at the supply-side
7. 7
FSD
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Download digital credit
Apps from both Google and
iOS stores
(Total of 110 Apps)
Register to use the loan apps (64
successful)
Check for data & app permissions
requested
Request for credit limit
(39 lenders, max amt 16,000)
Borrow from providers who
issued credit limit
Two loan cycles
Repay first loan at 5 days
Repay second loan at
maximum duration allowed
Total of 40 loans
Check your credit history from all
three credit reference bureaus
(54 reports)
Belling the cat
Understanding market conduct & practices of providers
9 research assistants:
2 never borrowed
4 borrowed & repaid
3 with default histories
Step 1
Step 2
Step 3
Step 4
Step 5
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Data requested by fintech lenders
Phone No
Name
Email
ID No
Age
Gender
Physical
address
Economic
status
Social media
acc
Income range
Data requested by banks
Phone No.
ID No.
Name
Age
Email
KRA PIN
We will seek to protect your data and funds available in your account, however, this is not something we are able to guarantee. …You
consent to the storage, transmission of data and communications through the Internet and you acknowledge that the Internet is not necessarily a
secure communications and delivery system, and you understand the confidentiality and other risks associated with it…We accept no liability if
communications sent via the platform are intercepted by third parties or incorrectly delivered or not delivered.
Use of data is far-reaching
For this purpose, I hereby waive my rights on the confidentiality of client information and expressly consent to the
processing of any personal information and records relating to me that might be obtained from third parties
Should we wish to use your information for marketing purposes, we will inform you prior to such use. You shall be entitled to prevent such
usage by informing us, within 10 days of being informed of the proposed use, that you do not wish to disclose such information
11. 11
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Lender
No.
loans
issued
Credit
reports
submitted
Tala 4 0
Dolax 1 0
Stawika 2 0
Upazi 1 0
Branch 2 5
Okolea 2 2
Timiza 3 8
Utunzi 2 0
Usawa 1 0
Craft 2 0
Kano 2 0
KCB M-Pesa 1 0
PesaPap 2 2
PesaZone 2 0
Stawika 1 0
M-Shwari 2 4
NIC Mobile
loan
2 6
Ubapesa 2 1
mKey 2 2
GetSaida 2 0
Kopa Cash 2 0
MCo-op Cash 1
Default history vs successful borrowing
• All banks required to submit credit histories to all the
three CRBs (Only 1 consistently submitted)
• Non-banks can submit voluntarily (and some are
submitting)
• 40 loans issued, 10 by banks and 30 by
non-banks
• 5 loans issued by non-banks to
borrowers with default histories (after 32
borrowing attempts)
• Inexperienced borrowers made 20
attempts but only 1 loan was issued by a
non-bank
• Rest of the loans issued to borrowers
without a default history
Compliance with CRB reporting requirements
14. 14
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Launched @Pesastory Twitter
handle to initiate conversations
with Kenyans on their experiences
with consumer protection issues.
3
Launch
Flagged tweets relevant to each
topic over 3 months. Not all
tweets were relevant and we
periodically added keywords to
make filters more effective
2
Monitor and analyze
Tracked every tweet to 29
financial institutions and sorted
them into 10 consumer
protection topics by keywords
1
Track
Testing the utility of Twitter to
provide insights on financial
consumer protection issues and
encourage a public dialogue
through the creation of a Twitter
handle, @Pesastory
Pesastor
y
FSD Kenya.
CitiBeats
Using CitiBeats AI text
analysis platform to track
and analyze consumer
protection relevant tweets
August to November 2018
Process
2 experiments in 1
Curate threads of tweets on
related topics to demonstrate
common experiences &
challenges.
4
Curate
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0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Providers
% Tweets per category, by provider
2%
7%
10%
0%
21%
3%
7%
3%
50%
2%
Agents
Blacklisting
Charges
Frozen account
Functionality
Insurance claims
Loans
Privacy
Resolution/customer service
Scams
Distribution of tweets across consumer protection
topics for a Kenyan bank, November 2018
Percentage of Tweets related to this topic
Observation 1:
• Most tweets are on customer service followed
by functionality.
• Distribution fairly similar across banks and MNOs
Platform allowed us to restrict data to a single provider
At any given time
17. 17
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Spike in Ecobank appeared to relate to access to accounts by customers
Observation 2(2): monitoring trends over time
Visual representation of how the volume of tweets on CP issues change over time for providers
Observation 3: Missing data on finTechs
• Twitter users most likely own a
smartphone
• Volume of tweets on fintechs very low
• Most have in-app functions for
complaints
18. 18
FSD
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Creating
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inclusion
Reflections: what do the results mean?
It's useful for you to write something special
For consumers-
• Digital credit: the digital world is shifting risks in
financial services with both positive and negative
consequences for consumers
• Complaints: Need to assert their rights. Social
media is changing ways in which customers
engage with providers, allowing them to publicly
call-out consumer protection issues
For regulators-
• Gains made have been undermined by
absence of effective regulation
• There’s utility in leveraging social media
analytics for consumer protection market
monitoring especially in markets with fast-
growing DFS
• Such methods should not be seen as a
replacement of existing tools but rather an
enhancement
19. FSD Kenya | Creating Value through financial inclusion
19
Thank You
For your time!
FSD Kenya | Creating value through financial
inclusion
3rd Floor, 9-Riverside, Riverside Drive
P.O. Box 11353, 00100 Nairobi, Kenya|
Telephone: +254 20 513 7300
Website: www.fsdkenya.org |
Creating Value through Financial Inclusion
FSD Kenya.
Editor's Notes
An audit study approach was used for this study. Audit studies offer a simple yet powerful methodological tool to examine issues that are often difficult to answer with observational data.
Of the 110 apps in September 2018, only 60 offer lending services