Uber drivers with rave reviews in Kenya to qualify for loans

Bella Genga
2016-05-26 09:43
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Nairobi - Uber drivers in Kenya have an additional incentive to go the extra mile: a local bank is offering them car loans based on how clients rate their service.

Sidian Bank, a closely held Kenyan lender, has set aside 10 billion shillings (R1.55bn) for loans to taxi drivers buying cars to work for the ride-hailing service, CEO Titus Karanja told reporters in the capital, Nairobi. The initiative will expand credit in a country where only 34% of people use credit, according to Kenyan central bank data.

The main requirements to qualify for a Sidian loan are a minimum of 500 trips and an Uber passenger rating of at least 4.6 out five points based on measures that include the driver’s timeliness and attitude.

“The finance and leasing options are focused more on the applicant’s proven Uber experience than on his or her credit history,” Karanja said Wednesday. “We expect speedy uptake of this financing package, with the entrenchment of Uber’s services in Kenya.”

Driving growth

Uber, which has 1 000 drivers in Kenya, plans to add another 10 000 over three years. Rides with Uber drivers hit one million after 15 months of operations in East Africa’s biggest economy and the company is seeing increased demand for its service in other urban areas of the country, acting general manager for Kenya Nate Anderson said. The rides are currently available in Nairobi and the port city of Mombasa.

The success of the business has irked traditional taxi operators in Kenya who have attacked Uber drivers and set fire to at least two cars demanding the app-based service be shut citing unfair competition. That violence only worked to make the service more popular, Anderson said. More than half of the company’s partners now are former traditional cab operators.

“What happened in January, February sparked a conversation,” Anderson said. “We did see accelerated growth during that time and were able to create even more economic opportunities.”

Sidian, majority owned by Centum Investment, Kenya’s biggest publicly traded investment firm, is asking for zero down payment for high-scoring drivers and will charge a 10.5% interest rate for the debt. In comparison, banks charged an average 18% for loans in February, according to central bank data.

Credit history

Drivers with no previous Uber track record will have to raise at least a tenth of the required amount and will be rated using the more formal credit history.

Sidian expects the cab-buying product could nearly double its 12.5 billion-shilling loan book. Drivers can borrow as much as 1.5 million shillings and pay it back within three years.

Kenya is accustomed to experimenting with innovate banking ideas. Vodafone’s Kenyan unit offers a service that enables mobile phone users to transfer money and pay bills using a product known as M-Pesa.

The platform had transactions worth more than $50bn in the year through March - equivalent to about 85% of the country’s economic output.