Two major Kenyan motorbike financing companies, JoyInc Creditors and Progressive Credit, have come under intense scrutiny from lawmakers over allegations of exploitative practices and a lack of proper regulation.
In a parliamentary inquiry, the lenders admitted to a staggering 45% default rate among borrowers and acknowledged operating without formal guidelines, raising concerns about the precarious financial situation of thousands of motorcycle taxi (boda boda) operators in the country.
The Departmental Committee on Finance and National Planning grilled the lenders over accusations leveled by boda boda operators, including exorbitant interest rates, inadequate grace periods for late payments, and improper repossession practices. The lenders struggled to provide satisfactory explanations for their recovery processes in cases of default, drawing skepticism from committee members.
“When a beneficiary defaults payment, the motorcycle is recovered almost immediately, whereas when it is stolen the motorcycle is never recovered. You must run your business professionally and within the law,” Committee Chairperson Kimani Kuria warned the lenders.
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Representatives from Progressive Credit admitted that their operations are not guided by any formal regulations, instead relying on guidelines set by a lenders’ association known as AMFI. This lack of oversight has raised concerns about the potential for unchecked exploitation of vulnerable borrowers.
“It is deeply concerning that these lenders, who hold the financial futures of thousands of boda boda operators in their hands, are operating without proper regulatory frameworks,” said Joseph Munyoro, the Kigumo MP who initially sought the statement on the matter. “This lack of oversight creates an environment ripe for predatory lending practices and leaves borrowers with little recourse.”
The high default rate of 45% cited by the lenders highlights the precarious financial situation faced by many boda boda operators, who often struggle with low incomes and struggle to repay their loans. National Transport and Safety Authority Deputy Director Aden Millah acknowledged that many operators who acquire their motorcycles through these financing arrangements ultimately clear their loans without fully owning the vehicles.
The committee has directed the lenders to provide more detailed explanations and has called upon relevant regulatory bodies, such as the Insurance Regulatory Authority, to closely monitor the lending practices in the industry.
