With uptake of credit cards failing to pick up in Kenya, commercial banks and other firms are turning to mobile phones to advance credit.
The banks are using the gadgets to advance micro-loans while other companies are offering credit that include electricity tokens, mobile airtime, data bundles and goods on higher purchase.
Interest on the mobile phone loans range from 10 percent to 16 percent, which is even higher than what commercial banks charge on personal loans.
Despite the high one-off interest and shorter payment periods, Kenyans are taking up the mobile phone credits fast.
There are currently 25.2 million mobile phone subscribers in the East African nation carrying out transactions worth over 26 billion dollars annually, while the number of people holding credit cards has not reached 200,000 with transactions standing at less than 200 million dollars annually, according to Central Bank of Kenya.
Utility firm Kenya Power which is the latest entrant in the mobile phone loans market has partnered with leading telecom Safaricom to advance electricity tokens worth between 1.1 and 22 dollars in a service dubbed Okoa Stima.
Okoa Stima, according to Kenya Power and Safaricom, allows users to borrow based on their historical relationship with the electricity utility firm.
The loan launched about a month ago comes at facility fee of 10 percent payable in seven days for both pre-paid and post-paid users.
Kenya Power also followed the footsteps of Safaricom to offer airtime and data bundle credits.
One can borrow airtime of as low as 0.05 dollars to 2.2 dollars and repay in seven days with an interest rate of 10 percent.
Over 50,000 Kenyans, according to the Commercial Bank of Africa which runs the most successful mobile micro-loan service in Kenya, seek credit via the gadgets every day. Enditem