The Kenyan subsidiary of the global financial technology firm, Eleving Group, known as Mogo Microfinance (Mogo Auto Limited), has found itself entangled in a significant financial fraud scandal. This entity, which deals with vehicle purchasing and provides access to financial solutions, has been accused of acting like a predatory lender similar to a shylock. Numerous complaints have emerged, suggesting that Mogo Microfinance is overcharging its clients for the loan facilities they have obtained. These claims have been the subject of investigations by local media.
The Competition Authority of Kenya (CAK) has received formal complaints and a barrage of grievances from Mogo Microfinance clients, all echoing similar concerns about exaggerated claims, overcharging, and demanding repayment of loans in US Dollars, even though the loans were originally taken in Kenya Shillings.
Despite the gravity of the situation, both the financial institutions regulator, the Central Bank of Kenya (CBK), and the consumer welfare oversight body, the Competition Authority of Kenya (CAK), have not taken action to address these allegations.
One complaint submitted to the CAK on April 8, 2023, outlined the frustration of a complainant who had been making monthly repayments for seven months. When they requested the loan balance to clear the facility, they were shocked to find that the amount issued was higher than the principal amount borrowed.
In the midst of these complaints and accusations, the acting Director General of the CAK, Adano Roba, did not respond to queries seeking comment on the matter.
Nairobi governor, Johnson Sakaja, raised his voice against Mogo Microfinance during the launch of the National Health Insurance Fund (NHIF) cover for boda boda operators, known as ‘Boda Boda Care.’ He called on President William Ruto to intervene, accusing the lender of terrorizing and exploiting boda boda owners with exorbitant interest rates, branding them as predatory lenders. Sakaja cited instances where motorcycles were impounded even after operators had paid more than double the initial value of the motorbikes.
In response to these accusations, Mogo Microfinance clarified that all Boda Boda loans are issued in Kenya Shillings. However, for cars and logbook loans, customers have the option to choose between USD and KES loans. The company offered a lower interest rate for loans issued in USD. The payment schedule remains constant in USD, with an amount like $100 to be paid monthly for the chosen loan term. This amount is then converted to KES based on the current forex exchange rate when the invoice is generated. Mogo explained that they convert to KES to accommodate customers who do not have USD accounts, and also because the company borrows in USD. Customers also have the choice to take their loans in KES, which comes with a higher interest rate but ensures stable payments without fluctuations due to forex exchange rate changes.
