Banks have gone as far as offering day loans interest free on mobile. What other use can this money be put to except gambling? Who borrows money in the morning with confidence of repaying by midnight other than a gambler?

What does this portend for out banks? What percent of money is lent to mobile fellas? If an event was to happen that rendered Wanjikus unable to pay, would we see banks collapsing ala mortgage crisis? What kind of event would this be?

Its very scary. I think banks are getting careless. Wanjiku is doing a ponzi scheme via mobile lending from different offerers, at some point the cookie will crumble!

1) There is a segment of society that finds mobile loans very beneficial to them. If you are not one of them, leave the loans alone. You don't have to eat everything on the Menu!

2) There are people who borrow and waste money. Even the "normal" loans from banks. Middle class has a habit of borrowing for consumption - Holidays, gadgets, weddings, holidays etc. Anyone with basic economics knowledge will tell you that is a very stupid thing to do! It is not the bank's responsibility to follow you and monitor how you spend money (unless it is something like asset financing etc). The bank's main concern and rightly so, is you ability to repay.

3) A major blanket default will never happen unless there is a major catastrophic event like a breakout of a major and sudden war. The lenders don't just wake up one morning and lend you 70k!!! They start small. say 1k and 2k and that grows depending on your history. The margins are huge enough to cover individual defaults, the risks are spread and the tenure of the loans are short. I don't see what event would lead Kenyans to default enmass on small to average amount loans. May be you should give us one or two examples of REALISTIC events that might lead to sudden (30 day window) MASS defaults!!

4) Banks are businesses. Not charities or the government. They deploy their money in the most profitable manner like all the other businesses or individuals. As bad as it might sound, it is not their responsibility to ensure that SMEs have access to credit (at an expense to their bottom line). That is why the government comes up with things like the youth fund, women fund etc. And it is not just banks.

5) To small businesses that need quick money to be repaid in days or few weeks, the interest is not exorbitant (many people have explained this here). When you compound, of course it is huge but the small business owners don't compound either theoretically (like you are doing) or practically. They pay within the 30 days in which period they will have made much money.

6) Finally, these products have a target market. I for one wouldn't go for mobile loans coz whatever I am doing would require a cycle of number of months (meaning the compounding would be real) and would need a larger amount than I would get via mobile loans. But if I was in a short cycle business like mama mboga, hawker, kiosk, restaurant, broker, most types of traders (getting potatoes from Kinangop, fish from Kisumu, selling uniform - I would need more stock in January compared to most months etc.) I would definitely take advantage of the facility if and when need be!

Too much theory. Zero data to support it.

Time will tell what the true position is.

You evidently have never heard of black swan events and risk management