Mobile Loan Scams: 8 Tricks Kenyans Fall For

Mobile Loan Scams: 8 Tricks Kenyans Fall For

In recent times, the Central Bank of Kenya (CBK) and the Directorate of Criminal Investigations (DCI) have raised alarm over the alarming rate at which Kenyans are losing millions in pursuit of loans through mobile apps. As the digital lending space expands, so too do the tactics of scammers exploiting unsuspecting borrowers. Below, we outline eight tricks that these fraudulent mobile loan applications use to deceive Kenyans.

1. Registration and Deposits

One of the most common tactics involves requesting deposits via shortcodes. Scammers promise instant loans but often require potential borrowers to pay a registration fee—often around Ksh 400. After completing the loan application, victims may be asked to pay additional amounts to access their loans, effectively trapping them in a cycle of payments with no return.

2. Upfront Fees or Loan Collateral

Fraudulent apps typically do not assess a borrower's ability to repay loans. They neglect to ask for credit scores or collateral, which legitimate lenders typically do. Instead, they may deduct interest upfront from the loan amount. For instance, if a borrower requests Ksh 2,000, they might receive only Ksh 1,460, with the remaining Ksh 540 being deducted as interest—an unethical practice in legitimate lending.

3. Location

Many of these scams lack a registered physical address or contact information. They operate without any affiliation to county or national government registrations. Instead, they often provide fake or non-existent telephone numbers, websites, and addresses, making it difficult for victims to trace them.

4. Models

Fraudulent apps often mimic the branding and operational models of legitimate financial institutions, such as banks and registered digital lenders. They may also use similar names and logos to create a false sense of trust. Additionally, they frequently lack their own registered Paybill numbers, rendering them untraceable.

5. Social Media Manipulation

Scammers leverage the names of public figures, including politicians and celebrities, to enhance their credibility. For example, Nairobi Governor Mike Sonko publicly denounced a fake page impersonating his Sonko Rescue Team Loan service. Such tactics are designed to deceive users into believing the legitimacy of these fake apps.

6. Spam Emails and Harassment

Once victims engage with these scams, they may find themselves bombarded with spam emails and threatening phone calls—especially if they default on a loan. Scammers often threaten to share negative information with the borrower's contacts, further intimidating them into paying.

7. Misspellings, Capitalization, and Grammar

Fraudulent applications are typically riddled with errors, such as misspelled names, awkward capitalization, and poor grammar. These mistakes can serve as red flags for consumers. Legitimate businesses usually maintain a professional appearance, including proper language use and customer relations services.

8. Rating Manipulation

Some scammers may manipulate users into giving them high ratings on platforms like the Google Play Store before they release any loan funds. This tactic exploits user trust to boost the app's perceived credibility, attracting more unsuspecting victims.

Regulatory Measures

In April, the Central Bank of Kenya took a decisive step by barring unregulated digital lenders from forwarding the names of loan defaulters to Credit Reference Bureaus (CRBs). Moreover, the Central Bank of Kenya (Amendment) Bill, 2020, was tabled in Parliament to regulate monthly interest rates charged by digital lenders and address the issue of non-performing loans. This bill aims to empower the CBK to supervise digital lenders more effectively and combat the predatory lending practices that have trapped many Kenyans in debt.

Conclusion

As mobile lending continues to grow in Kenya, awareness of these scams is crucial. By recognizing the common tricks employed by fraudsters, individuals can better protect themselves from falling victim to mobile loan scams. It is imperative to approach unfamiliar loan applications with caution, conduct thorough research, and report suspicious activities to the relevant authorities to ensure consumer safety and integrity in the digital lending landscape.