MPs have intervened to save boda boda operators from exploitative asset financing agencies charging three times the cost of the motorbike.
National Assembly’s Finance and Planning committee on Thursday started probe into the exploitation rampant in the boda boda industry.
The move follows public outcry by riders across the country over the abuse that has been ongoing in the sector, pushing a majority of the riders into depression.
Some boda boda operators confessed that some of their colleagues have taken their lives after failing to repay their loans as others suspiciously lose their motorcycles months before clearing their loan obligations.
The situation is rampant under the buy now, pay later model being offered by asset financing agencies to entice the low-income operators, who cannot afford one-off purchase.
The watchdog committee chaired by Molo MP Kuria Kimani, was taken aback after it emerged that riders end up paying three times the cost of the bike.
The revelations came when they met Watu Credit Limited CEO Andris Kaneps and country manager Eric Massawe on the high interest rates charged by the lender.
The asset and finance solution has financed in excess of 700,000 automobiles to an estimated 2.1 million operators.
“On the interest charged, you spoke of 8.6 per cent month, calculate it per year it is enormous. Within one year the interest is more than the value of the asset,” Karachuonyo MP Adipo Okuome said.
“Do you think this approach of business is exploitational?”
Committee chairman Kimani also accused the firm of not making full disclosure to the desperate riders who end up signing for the motorcycles and giving the lender complete ownership rights.
“The contracts that you give to borrowers, there are special and general terms. Have this been availed to members?” he posed.
“The legal document, which they do not have, obligates you as the owner. One is therefore paying for something and they sign that it is not theirs.”
The lawmakers also accused Watu Credit of evading the existing laws that guides the sector.
Butula MP Joseph Oyula accused Watu Credit of exploiting legal gaps to exploit riders.
“The company has created confusion to cover up the regulatory authority they fall in. If they [riders] knew what what they are going through, you won’t have any customers,” Oyula said.
But in its defence, Watu Credit told the House team their interest rate is determined by a number of factors, including risks involved.
“The 8.6 per cent interest per month is not the whole asset value. It is interest that is applied to the financed amount. It is based on reduced balance model,” Massawe said.
The company also distanced itself from the theft of motorcycles that disappear when one is about to finalise payments.
“We are aware of the growing risk of suspected organised crime elements perpetuating motorbike theft. From our current portfolio of 400,000 financed motorbikes, less than 100 motorbikes have been reported as lost,” Massawe said.
The committee will next week meet more lenders in the sector as it moves to check on the complaints by the riders.
Scheduled to appear next week are Mogo Credit Limited and M-Kopa Credit.