What promised to be the way out of poverty for thousands of jobless youth has instead turned out to be their bane as they struggle to repay loans they took to buy motorcycles to join the boda boda business.
Lamentations are the order of the day, with many counting losses after lenders impounded the motorcycles due to unserviced loans. In Voi in Taita Taveta county, Mr Charles Oketch’s motorcycle was repossessed by a microfinance company last year, just five months after he signed an agreement with the lender.
The 28-year-old said he had already paid a Sh15,000 deposit and weekly instalments totalling to Sh25,000.
“My wife was sick so I did not have money to repay the loan. The agent would not listen to any of my pleas to give me time to pay them the Sh40,000 that had accumulated for two months,” he said.
At one of the lenders in Voi town, a motorcycle that would cost Sh124,000 if paid in cash costs Sh214,000 on hire purchase.
The borrower is also required to pay a Sh15,000 deposit to cater for insurance and tracking devices that are fitted on the motorcycle. The installed tracking devices help the firm to impound the motorcycle in case the customer defaults on his loan.
And depending on the motorcycle’s capacity, the hire purchase instalments can range between Sh2,600 and Sh3,500 weekly.
“In case the period lapses and you have not finished the payment, you will be slapped with weekly penalties,” explained Mr Denis Mutie.
Defaulted payment
The 24-year-old from Voi town took his motorcycle on loan and says he has defaulted his payment for weeks due to lack of money. He projects that, by the time he completes the payment, he would have paid over Sh260,000.
“I wish I had not taken the loan. The creditor keeps calling me. I am almost falling into depression because all the money I get I pay them so I see no reason for me to work hard,” he said.
He said he fears that the lenders will repossess his motorcycle yet he has already made a payment of over Sh130,000. He asked the government to regulate the lenders to cushion young people from debt distress.
Taveta MP John Bwire has tabled a motion at the National Assembly to regulate the interest rates being charged by microfinance institutions. He said despite the transport industry injecting over Sh1 billion into the economy daily, the bodaboda sector that mostly comprises the youth has been neglected.
The MP wants the State to publish regulations to regulate the business of hire purchase of motorcycles by the dealer claiming that some were exploitative.
The MP blamed regulatory gaps for increased cases of suicides and crime by youths.
“There has been an increasing number of outstanding debts by youths acquiring boda bodas from dealers through hire purchase, which are currently not regulated or supervised by relevant government authorities, and resulting to the increased cases of suicides and crime by youths,” he stated.
“Article 55 of the Constitution provides that the State shall take affirmative action programmes to ensure that the youth have opportunities to associate and participate in social, economic and other spheres of life, and have access to employment,” he further stated.
Mr Bwire has urged Parliament to direct the Cabinet Secretary for National Treasury and Planning to make regulations to govern the business.
He wants the regulations to ensure that the lenders provide their customers with sufficient information including interest rates, discount rates, service charges, default interest rates, and any other information about the purchase of the boda boda on hire purchase.
He wants the government to provide maximum interest rates, default penalties, service fees, deposits, and collateral to the extent permissible by the state.
