Wonga South Africa announced this week users will be able to obtain micro-loans using their mobile as a way of beating the low levels of computer access in the country and expanding its subscriber base.
HumanIPO reporters Richard Cutcher and Gabriella Mulligan debate the issues around contacting potential borrowers through mobiles.
The case for: Richard Cutcher
There are already plenty of options for people to gain access to short-term, high interest loans with the market busy with numerous providers (Wonga, Xcelsior, COBOL and In Seconds to name a few). It is not surprising its most recognisable player is looking for new ways to increase its market share and improve accessibility.
There is no difference between Wonga and others exploiting the high use of mobiles for Internet as there is for content providers, such as iROKOtv and Afrinolly. They are all paid-for services. Everyone wants in on the mobile game. Just like content providers, those with poor access to computers, but good Web access on mobile, should not be punished.
We should not kid ourselves that real, unregistered and unregulated loan sharks do not exist on African streets, providing much more instant and most importantly dangerous money-lending services. If turning more people who need a short term cash fix away from the rogue lenders is the result of mobile access then they will be more than worthwhile.
The case against: Gabriella Mulligan
Micro-financing private companies offering high-interest loans should not be allowed to contact people through mobile phones, in order to prevent loan sharks preying on individuals in desperate financial circumstances.
Wonga’s launch of a mobi loan site, with the aim of targeting individuals who do not have access to computers, translates in the African context as the targeting of rural and low-income individuals.
Making high-interest loans so readily accessible is dangerous, as there is no guarantee that users have read and understand the terms – such as repayment in full including interest within 30 days – or the long-term implications of entering into such loan agreements, such as mounting interest rates, the involvement of debt collectors, legal action and a long-term debt record in the case of late or non-repayment.
Reputable micro-financing institutions should make themselves available in person in the field in order to ensure customers understand what they are agreeing to, and should provide realistic repayment options for individuals under financial pressure.
Doing business should not involve crippling the underdog.