In our series of letters from African journalists, Kenyan broadcaster Waihiga Mwaura looks at how debt collectors are causing outrage with their latest intimidation tactics to recover loans given via digital-lending apps.

A pastor showed up in our newsroom in Kenya's capital, Nairobi with a unique complaint.

Over a week-long period, his phone had been inundated by calls from debt collectors who claimed that one of his congregants had nominated him as the guarantor to a loan that she had taken.

At first the man of cloth thought it was a joke but after several annoying phone calls he moved from curiosity to bemusement and finally anger at how invasive this form of debt shaming was.

The intensity of the phone conversations changed from day to day.

Initially the callers were polite and simply asked him to speak to his congregant to pay back the money she had borrowed the month before.

But soon thereafter the callers became more aggressive and even crass, calling him a fake pastor who refused to speak truth to his congregation about the paying of debts and promising that they would make his phone "explode" with their incessant calls.

To add insult to injury they even abused his wife when she tried to intervene.

For several days the pastor could not use his phone because he refused to comply with the demands of the callers.

And after the story hit the airwaves and social media with the #Debtofshame hashtag many Kenyans started relaying their experiences when confronted by debt collectors.

One Twitter user said he was warned that "if I don't pay, they will come for my kidney".

Another said she once borrowed 2,000 Kenyan shillings ($18; £13), and 10 days later "they were on my neck. I couldn't sleep nor think. I got all the insults one could think of".

A third recalled that when he worked as a debt recovery agent, he had to meet daily targets set by his employer.

"The owners didn't care about how you recovered the money. They are only interested in recovering their money. I had to quit for my sanity," he said.

Mobile money dominates

There is no doubt that Kenyans have embraced taking loans through digital-lending apps.

They are discreet, quick to access and require no collateral.

But therein lies the dilemma for the lenders who use the repayment habits of users to gauge their creditworthiness and they never physically meet their customers.

Indeed, none of this would have been possible if the African continent was not the global leader in mobile money.

Mobile network operators have dominated money services in Africa for the last decade.

More recently however the spotlight has fallen on the financial technology companies that have established a solid footing, some backed by huge venture capital groups in Western and Asia markets.

They capitalise on a gap in the lending sector where low-income earners have no access to credit because they lack employment opportunities, collateral or guarantors.

But their entry into the African market has raised a storm over the fact that they are largely unregulated, and because of their perceived unethical style of doing business.

They capture gullible young people into debt distress very early and the companies shame them using unconventional techniques if they fail to pay.

And while Kenyans have been quick to embrace these loans some have described their interest rates as exorbitant.

While the interest on an average bank loan is between 12% and 14% each year, for a mobile app loan it can be anything from between 75% and 395% per annum.

Mortgages via phone apps

In addition, some of the players have been accused of predatory lending practices with one Chinese-based lender accused of requiring loan repayments within 30 days while Google, the host of these apps, requires borrowers to be allowed 60 days to repay.

But the chairman of the Digital Lenders Association of Kenya, Kevin Mutiso, is quick to defend his members, saying debt shaming is a bad symptom of a good idea that has helped many small-scale traders to get quick access to credit.

He says without digital credit many Kenyans would not have been able to survive the lockdowns introduced since the outbreak of Covid-19 more than a year.

People have been able to buy food, pay their rent, pay for transport and utilities and also school fees through these mobile loans, he says.

Whilst some believe regulation is the key to taming rogue lenders others are concerned that regulation will stifle an industry that could hold the key to jobs and investment in an economy battered by coronavirus.

And even with laws such as the 2019 Kenya Data Protection Act - designed to prevent the misuse of personal data - it seems impossible to stop the digital lending juggernaut.

According to some market watchers, it could soon be financing the next generation of mortgages via mobile phones. (Text excluding headline courtesy, BBC)

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