What kind of regulations do you want from the problems you have highlighted? Vet gamblers? Visit mama mbogas kiosk to see how the business is doing?

And kindly don't talk about interest rates coz that would mean no costing of the risk you talk about.

Kindly give a list of things you think need to be done that fall into your new regulation argument.

I am seeing serious parallels between our mobile loans and mortgage crisis of 2000. For mobile loans its worse because there is not even the pretense of loan being asset backed.

The mobile loan segment is bound to grow. Bank execs will get more and more careless in lending via mobile because it offers high short term returns thus higher short term bonuses.

People who resort to mobile loans are usually the financially vulnerable. These people get hit first and hardest by economic issues.

As mobile loans grow and constitute the bigger chunk of a banks loan book, we should see more and more provisioning as these are high risk borrowers. However, for this to happen, we need to see data on mobile loans advanced vs default rates and timings. Its about time they were classified as a seperate bank asset class and tracked accordingly ( regulation no. 1)

Banks should be curtailed on how much they can loan to mobile. A regulation should be in place to say that a bank should not have more than 30% of total loans as mobile loan ( regulation 2). I know some will say that banks need to make money. However, that money they are lending is partly my money (deposits). Why should a bank exec put a large portion of my deposits on a high risk asset then earn fat bonus at my expense. In case of widespread default, I will lose my deposits while he goes home with his bonuses.

Widespread defaults do happen. Refer to mortgage crisis of 2000. These defaults are unpredictable, and the reasons behind them are once in a lifetime reasons. Therefore, no use asking for examples from the past.

As an economy, CBK must step in to regulate mobile loans sector. CBK governor has expressed concerns about money laundering under guise of mobile loans provider.

From the Lenders perspective, mobile loans is a Ponzi. You are giving money to people you dont know, dont know their ability to pay back, dont know their sources of income, dont know how the money will be used. Meanwhile, you expect exponentially high returns. As the scheme grows, more people will join in. They will feel safe while living on the edge of default. Their credit ratings grow as a cohort over the months and years. Then something happens and people just cant pay. Cash flow dries up in the economy almost instanteneously.

....or you could just have the banks set up separate companies for this purpose and thus ring fence the risk and protect the depositors funds.

As long as CBK is controlling the money in the economy, what would your worry be?

Would you sleep better if the money stayed in banks without circulating?

What mobile money is doing, and this is not limited to loans, is increasing the velocity of circulation. If it was taking you 5 days to send money to Bungoma, its now instant. If it was taking someone 2 months to get a loan from a bank, that has been shortened to 1 day or less.

Am still waiting to see how the Ponzi issue is coming in?

Loans at high interest rate for short tenure don't increase money supply. It might actually reduce money supply especially if you borrow for consumption. Money that you would have spent in the future will end up with the bank (in terms of [high] interest rate).

I hate boring wazuans with obvious details but if you insist I can give you a practical example of how you end up with less money to spend in the long run if you borrow at high rates for short term for consumption!!!

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I will try to help you on this one



This video should assist

If you had answered my questions you would have understood. It has a lot to do with tenure.

For example, during Kibaki's time, the economy was doing great. You give a company a 10 year loan then UhuRuto happens. Economy goes to the dogs. What happens. Now imagine a tenure of 30 years. In as much as the experts can see the signs a year, two or even three in advance, what do you do with a 30 year loan. If it was a one, two or three year loan, you might get out unscathed. If it is a one month loan, much much better.

Deleted. Repeated post.

@Maich, kindly fafanua how mobile loans do not increase money supply. I am really interested in learning this point. As a river road economist, I think they increase money supply.