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Grifting the Poor: A Global Tradition

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As many have long known within the horrors of capitalism, there is a lot of money to be made off the poor. We know that it is very expensive to be poor here in the United States, with many services simply be both pricey and inaccessible when you don’t have access to modern conveniences, transportation, the money to buy in bulk, and the money to avoid debt repayments. Payday loans are a classic example of this. The Cleveland Cavaliers championship teams were built with this money, thanks to its scumbag owner Dan Gilbert, who has made billions stealing from the poor.

Such things are hardly restricted to the U.S. This Boston Review essay on short-term loans apps in Kenya and the cycle of unpayable debt this leads to is disturbing.

Across conversations in Kenya’s pubs and WhatsApp groups, debt is on everyone’s mind. The speed and ease of access to credit through new mobile apps delivers cash to millions of Kenyans in need, but many struggle to repay. Despite their small size, the loans come with a big cost—sometimes as much as 100 percent annualized. As one Nairobian told us, these apps “give you money gently, and then they come for your neck.”

He is not alone in his assessment of “fintech,” the ballooning financial technology industry that provides loans through mobile apps. During our research, we heard these emergent regimes of indebtedness called “catastrophic,” a “crisis,” and a major “social problem.” Newspapers report that mobile lending underlays a wave of domestic disarray, violence, and even suicide. One young man in Meru described it as a “can of worries.” His monthly salary was not enough to cover ordinary expenses such as rent and necessary contributions to extended kin networks—let alone leisure or investments in his own future. So, like millions of others, he turned to phone-based loans, at one point toggling between five different apps. Reeling as the costs added up, he struggled to repay, deleting the apps so he would not be tempted by repeated offers of dangerous debt.

Relations of credit and debt are nothing new to Kenya. For ages, friends, family, and colleagues have lent and borrowed from each other, but what differs today is a lack of reciprocity. In peer-to-peer credit, everyone is eventually likely to be a debtor and a creditor; terms can be reworked according to timelines and margins that are subject to negotiation. In contrast, the fintech industry envisions ordinary Kenyans as first and foremost borrowers, leading many Kenyans to describe their predicament as a form of servitude. One Kenyan argued the apps are “enslaving” people—from the working poor to the salaried classes—by making claims on their future labor.

Indeed Kenya’s new experience of debt is worrying. It reveals a novel, digitized form of slow violence that operates not so much through negotiated social relations, nor the threat of state enforcement, as through the accumulation of data, the commodification of reputation, and the instrumentalization of sociality. Kenyans are being driven into circuits of financial capital that are premised not—as the marketing would have it—on empowerment, but on the profitability of perpetual debt. The eruption of over-indebtedness in Kenya marks the intersection of a faith in finance to ameliorate the lives of the poor and a recognition by techno-capitalists that those same populations are the source of runaway profits.

The problem of course is that Kenyans are poor and lack access to stable jobs with wages that would let them plan for their future. But, as in this nation, the secondary problem is that people blame the poor for their own poverty, opening the moral space to profit off it.

So worrying are the trends in Kenya that even proponents of digital lending are calling for caution. The Central Bank of Kenya has demanded borrowers are made aware of the apps’ terms and conditions, but at present a legislative mandate does not exist that would require much more than disclosure by non-bank lenders. Donors, including the groups that have done the most to valorize digital finance, are beginning to advocate similar consumer protections, from transparency requirements to rules around reckless lending. A group of fintech lenders have tried to head off official regulations by signing a voluntary code of conduct and forming a lobbying group. Promising not to lend more than 40 U.S. dollars to first-time borrowers, or to clearly present the terms of a loan, may help around the margins, but commercial self-regulation will not transform the profiteering of globally ambitious venture capitalists.

The obstacles to getting relief to Kenyan borrowers go beyond regulatory policy. Regulators, donors, and industry share an underlying assumption that individuals get into trouble with debt because they are confused or imprudent. Financial inclusion advocates and venture capitalists only see people as borrowers or entrepreneurs. Yet, the shared predicaments of so many Kenyans are better understood in terms of the emergence of a new class. Kenya’s indebted class is united by its inclusion in the zero-balance economy: whether working as a hawker who cannot accumulate sufficient stock or an employee whose salary is not enough to last the month, the irregularity and paucity of income in Kenya compels borrowing. With rent coming due, school fees on the horizon, and relatives asking for help with medical costs, digital loans are not taken for lack of information or awareness; rather, Kenyans must borrow to make ends meet. Their constraints on social reproduction cannot be solved by appeals to liberal aspirations for informed consent. Their indebted status is not a sign of empowerment; it is evidence of their subordination to economics arrangements not of their choosing.

Venture capitalists are a plague upon the world, no matter where they originate.

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