I think this discussion has really digressed. But it has been interesting for me.

I guess a major question to be answered is " Do mobile loans lead to an increase in money supply? "

Money may not be available to the middle class conventional / traditional bank borrower, but has money become more available to the 70% of low income earners that constitute this economy?

Does the typical mobile loan borrower think about interest rates? Would it be a moot point trying to use normal free market logic to say with high borrowing rates, inflation rate will slow down? Of course the premise of this free market theory is that borrowers are rational and will avoid borrowing when rates go up and vice versa. Does this apply to mobile loan applicants?

The weak link in monetary policy is the connection between money as a stock and money in circulation, the so-called velocity of money. The velocity of the circulation of money refers to the frequency of the monetary transactions in an economy. One unit of money serves for several transactions over time.

Whatever the aggregate used, the velocity of money can strengthen or weaken the effects of a change of the amount of money. The countermovement of the velocity can change an increase of the stock of money into a contraction or turn a monetary contraction of the stock into an expansion. Inflationary expectations lead to a higher ratio of the velocity of money while deflationary and dis-inflationary expectations lead to a lower ratio of the velocity.

The frequency of the monetary transactions depends on the decisions of the individual users of money in the economy. When people decide to use money more rapidly, the velocity rises, and this would accelerate the effect of the expansion of the monetary stock. When, in contrast, the public uses available money more slowly, the velocity falls. Such actions would offset the effect of the expansion of the stock of money, or, in the case of a reduction of the stock of money, accelerate the contraction.

The velocity of the circulation of money is subject to strong swings. Because the ratio is not stable, the effects of changes in the money supply are not certain. There are no tools to control the velocity. The monetary authorities are not able to foresee how the velocity of money will change. The trends may be long or short, and when they are long and seem to be stable, they may change abruptly. A reliable calculation of the future trend is not possible even if many data points are available.

Well at least someone has figured out how to milk money from Wanjiku.

KRA keep brainstorming.
Banks keep loaning to the government and complaining anga sijui rate cap.

Fast forward 10 years:
Safaricom:
- Has an iron grip on the telecommunications industry.
- Has a loan book equal to or bigger than Tier 1 banks
- Is the largest home security provider in the Eastern Africa region
- Has a cash flow larger than the GoK Treasury

We're a capitalist economy. Your goal is to make money in spite of the prevailing market conditions. You can innovate and offer new products, or keep sitting on piles of cash "because it is too risky to lend it out".

[quote=tom_boy]Beijing, China, Dec 6 – When Jia Xinru needed to borrow money to buy new clothes, order food and buy a projector to screen Breaking Bad on her wall, she had instant access to China’s growing number of lenders via her mobile phone.

The 24-year-old secretary is among millions of Chinese who have turned to proliferating online companies that dish out quick loans — and are worrying the country’s leadership.

On Friday authorities issued new rules on microlending, designed to protect consumers and limit risk for creditors. The move was the latest aimed at tackling financial risks as the world’s number two economy faces ballooning debt that has drawn warnings of a potential global financial crisis.