Home » Mogo Microfinance Faces Backlash Over Alleged Loan Fraud and Unethical Practices

Mogo Microfinance Faces Backlash Over Alleged Loan Fraud and Unethical Practices

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The Kenyan subsidiary of Eleving Group, known as Mogo Microfinance (Mogo Auto Limited), is currently facing a severe financial fraud scandal, with numerous complaints emerging from its clients.

The entity, specializing in vehicle purchasing and financial solutions, has been accused of acting as a predatory lender, reminiscent of the infamous shylock archetype. Local media investigations have shed light on these allegations, raising concerns about the company’s practices.

At the center of the accusations are claims of overcharging clients for loan facilities obtained from Mogo Microfinance.

The Competition Authority of Kenya (CAK) has received formal complaints and a barrage of grievances from the company’s clients, all echoing similar concerns of exaggerated claims, overcharging, and repayment demands in US Dollars, despite the loans being initially taken in Kenya Shillings.

Despite the gravity of the situation, both the Central Bank of Kenya (CBK), the financial institutions regulator, and the CAK, the consumer welfare oversight body, have yet to take action to address the mounting allegations against Mogo Microfinance. This lack of immediate response has fueled frustration among affected individuals.

One complaint submitted to the CAK on April 8, 2023, highlights the ordeal faced by a complainant who had been making monthly repayments for seven months.

To their astonishment, when they requested the loan balance to settle the facility, they discovered that the issued amount exceeded the principal amount originally borrowed.

In the midst of mounting complaints and accusations, the acting Director General of the CAK, Adano Roba, has remained silent, refusing to respond to queries seeking comment on the matter.

This lack of transparency has further intensified concerns and deepened the grievances of the affected borrowers.

Nairobi governor, Johnson Sakaja, has taken a strong stance against Mogo Microfinance during the launch of the National Health Insurance Fund (NHIF) cover for boda boda operators, known as ‘Boda Boda Care.’

Sakaja urged President William Ruto to intervene in the matter, accusing the lender of exploiting boda boda owners with exorbitant interest rates, labeling them as predatory lenders.

He cited instances where motorcycles were impounded even after operators had paid more than double the initial value of the motorbikes.

In response to the accusations, Mogo Microfinance attempted to clarify its loan procedures. The company stated that all Boda Boda loans are issued in Kenya Shillings.

However, for car and logbook loans, customers have the option to choose between USD and KES loans. Mogo Microfinance offered a lower interest rate for loans issued in USD.

The payment schedule remains constant in USD, with a fixed monthly payment converted to KES based on the current forex exchange rate when the invoice is generated.

Mogo justified the use of KES for loan conversion to accommodate customers who do not have USD accounts and to align with the company’s borrowing practices, which are done in USD.

Customers also have the choice to take loans in KES, which come with a higher interest rate but ensure stable payments without exposure to fluctuations caused by forex exchange rate changes.

As the situation continues to unfold, Mogo Microfinance finds itself under intense scrutiny, with both regulatory bodies and the public closely monitoring the actions taken in response to the accusations.

The mounting complaints and the involvement of high-profile figures like Governor Sakaja have thrust this financial technology firm into the spotlight.

For now, the affected borrowers await a swift and appropriate resolution to their grievances, while the authorities assess the validity of the allegations against the company.