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Nairobi has seen a steady increase in the number of shylocks promising instant loans against items with no regard for Credit Reference Bureau (CRB) rating.
These entities have mushroomed all over the city, a sign that their services are in great demand with most outlets also doubling up as second-hand items dealership acquired from those who fail to repay loans.
Most are registered as shops as they have not met the requirements for microfinance institutions with only the signage to direct potential clients of the services offered.
It is an unregulated enterprise in which those who seek loans are left at the mercy of the unscrupulous dealers.
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Those who want to forgo long procedures at banks as well as those who cannot acquire credit from mainstream channels such as banks and digital lenders turn to shylocks in their droves.
The murky world of shylocks in Nairobi: The good & the bad facts you should know
Here, all that is needed is a copy of one’s ID, phone contacts, an item against which the loan is taken or a physical location of a business owned by the loanee.
Few restrictions but at a cost
Household items such as TV, fridge, seat, ovens and microwaves, and other electronics are all acceptable as are laptops and phones.
One would almost think that they are a godsend, dishing out money with few restrictions but the reality is that the money does not come cheap.
An attendant at one of the many shylock shops along Moi Drive in Umoja who was interviewed for this publication gave some insights and clarity on what goes on in this business that is taking over the city, confirming that their services are in great demand.
They have contracts with high interest rates that increase sharply over a short period of time if one is unable to repay.
Consequences of failing to pay
It is almost as if it is designed to ensure that the loanee never pays, leaving the shylock with the item against which the loan is taken and those who can manage end up parting with close to double what they borrowed.
Most of the time the item ends up remaining with them due to the high interest rates that they charge on the loans.
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Often times the item is of greater value than the loan advanced, and even if one is able to repay, the interest is much higher.
“We are not like banks and our only surety that one will repay the loan or at least come back to us is when we take an item that is of greater value which acts as a motivation for the loanee to return the money.” The attendant explained.
Some tend to employ unconventional tactics when they want their money or simply take possession of the items against which the loan was given.
For those who fail to repay, the items end up being sold as second-hand items while those that can be refurbished such as seats are revamped and sold off as new.
“Yes it is true that we resell the items at a higher price than the loan against which they were acquired but not all are sold. Some get damaged due to wear and tear meaning it is a loss on our part. The only way to stay afloat is by competitively pricing the few that we are able to sell. There are associated costs too that people tend to overlook such as storage, paying attendants at this shop and selling the item." He added.
The murky world of shylocks in Nairobi: The good & the bad facts you should know
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He concluded the interview by cautioning people to thoroughly review the contract before signing, adding that the are in business and the notion that they exploit clients is misleading as they only stick to the contract and those who are not comfortable should stay out.