The Good and Bad of Mobile Loans

It is hard to say how many mobile loan providers are in Kenya because there is no single database on that subject. A quick search on Google PlayStore shows there are literally hundreds of mobile loan providers. The most popular being Tala, Branch, KCB MPESA and Mshwari.

In addition to the standalone mobile loan providers, banks are offering quick loans to their customers through mobile phones. Some credit cooperatives (Saccos) have joined the fray but their mobile loans are restricted to members only.

Then there’s the latest entrant – Fuliza – which allows MPESA users to pay for goods and services on credit.

Access to loans from mobile phone sources has made life easier for many. The short term loans are helping people buy household necessities, pay school fees, clear hospital bills, and to build up stock for small businesses. With the Kenyan economy currently in recession, life would have been much more difficult without mobile loan services.

“Never spend your money before you have it …,” said Thomas Jefferson, one of the U.S. founding presidents. Jefferson meant that when you borrow, you are actually spending your future income because you must eventually repay that loan. Mobile loans are so easy to get, the temptation to borrow is high, but is easy borrowing the instant solution to money problems?

Good loans and bad loans

A good loan is money borrowed to finance an income generating activity. For example, borrowing to stock up your business, or to repair a matatu is a good loan. From these activities, one recovers the money needed to repay the loan. A bad loan is money borrowed for activities that do not generate an income such as paying house rent, buying groceries or paying for your home’s satellite TV subscription. The borrower will have difficulties repaying the loan.

Understand why you are taking the loan

If you have to take loans every month just to pay house rent, then you are living beyond your means. Find out why you have to keep taking loans. You either cut down on living expenses, or find another business activity or job that will give you a higher income. Constant borrowing is not the solution to a low income problem.

Make a repayment plan

Whether you take a loan of 500 shillings or 50,000 shillings, you must have a plan on how to repay it. Calculate how much money you must save each day or each week so that you can repay the loan on the due date. If the amount of money that you must save is higher than your income, please don’t take that loan because you will fail to repay on time.

Avoid borrowing from one to repay the other

The large number of mobile loan providers is tempting people to borrow from one to repay the other. You are in a debt trap if already doing this. This is a sign that your income cannot support your lifestyle. Eventually, you will default on repaying the loans and it will become impossible to borrow anymore after you are blacklisted at the Credit Reference Bureau (CRB).

Negotiate with the mobile loan providers

Don’t panic if you are not able to pay back the loan on time. Instead of ignoring the phone calls from the mobile loan provider, discuss how you can pay in installments. For example, you might not afford to pay Shs. 9,000 right away, but you can afford Shs. 3,000 per month for the next three months.


In the end, it is impossible to survive in the modern world without taking a loan. However, loans must be taken responsibly and paid back in time. “The wicked borrows but does not pay back, but the righteous is generous and gives,” reads a quote from Book of Psalms.

Who do you want to be? A wicked borrower or a righteous one?

Got a comment?
Share to more on: