“Quick Loans”

“Instant Cash”

You have probably seen posters with such messages plastered on business premises, walls, utility poles, or even trees.

Who doesn’t like the concept of fast cash?

Borrowing from a bank, Sacco, or any other lending institution usually involves a cumbersome process with paperwork and sometimes a waiting period before getting the cash.

Quick loans, on the other hand, from shylocks, typically have a reduced number of application steps, and the fact that they are available to almost everyone, even those with bad credit scores, makes them easily accessible and appealing.

But what most people don’t know about these quick loans is that they are often a black hole which, once you start digging, you might not be able to come out of.

So, who is a shylock, and why are they so appealing?

In the literary world, Shylock was a Jewish moneylender in Shakespeare’s comedy The Merchant of Venice. He was a greedy and vengeful character.

In the comedy, Shylock lends Antonio money on the condition that if it is not repaid, then he will be entitled to a pound of Antonio’s flesh.

In current times, a shylock is a term used to refer to someone who lends money at excessive/high interest rates. And he will get his pound of flesh if a loan is not repaid.

This predatory lending practice preys on those who are in desperate need of cash and often leads to a cycle of debt and financial ruin.

Shylocks prefer clients who are looking for huge loans, not because of their huge returns but the high rate of potential default.

As appealing as they seem because of the swift access to cash, in many instances, the relationship between shylocks and their clients is not the best. Reports of intimidation, loss of property, loss of lives, and opaque contracts often accompany their associations.

Even so, clients are still drawn to them because of the ease of getting credit: there are no endless questions and paperwork to secure the financial boost.

All you need is some form of security, which could range from electronics to a title deed or your car logbook. The transaction can be completed in a few minutes.

Today’s Shylocks have streamlined their tactics to lure people. Some even identify themselves as ‘microfinance’ institutions.

But don’t be fooled by the promise of instant cash free of the rigorous procedures that characterise bank lending because when they come for you, you might lose more than a finger.

This is because shylocks operate like unregulated finance companies, and they rely on the sanctity of contract law to stay in business.

A contract signed with a shylock will be poorly worded, ambiguous and skewed in such a way as to be misunderstood or misinterpreted.

Kenya has no express law against being a shylock. The practice itself is so vague and benefits from poor regulation.

However, the country has put in place strict laws and regulations to curb this exploitative practice. The Money Lenders Act, Cap 273 of the Kenyan laws, strictly prohibits shylocking. Under this act, any person or entity engaging in money lending activities without a valid license issued by the Cabinet Secretary is deemed to be shylocking. The Act also sets out the maximum interest rates that money lenders can charge in order to protect borrowers from exorbitant fees.

Several studies have highlighted the detrimental effects of shylocking on individuals and communities in Kenya.

A case study conducted by the Consumer Federation of Kenya (COFEK) found that shylocking practices have led to a cycle of debt and poverty for many Kenyan borrowers. The study revealed that borrowers often end up paying back several times the original loan amount due to the high interest rates charged by shylocks.

Still, the government has continued to take steps to regulate and enforce laws to protect borrowers from predatory lending practices.

However, the presence of unlicensed money lenders continues to be a concern, and more needs to be done to ensure the effective implementation of existing regulations.

So why should you avoid shylocks?

According to Elevate Africa, reasons you should avoid shylocks are:

High-Interest Rates

Loans from shylocks come with very high-interest rates. They are often way above the interest rates charged by lending companies. This makes it expensive to repay the loan. Because of the high-interest rates, it becomes tough to complete the loan payment, meaning you might end up taking another loan to pay off a shylock, going back to square one.

Harassments And Threats

When dealing with shylocks, falling behind on payments often results in harassment and threats. There have been cases where people have been physically attacked and intimidated by shylocks. Since they are not a registered business with a government body overseeing their operations, any legal complications cannot be handled with any government body.

Complicated Rules

Some shylocks put weekly interest rates, some put annual, and some days, such complicated interest rate calculations make it difficult for the borrower to calculate the total amount accurately, meaning you might pay more than you owe.

Despite shylocks offering loans at an expensive cost, they seem to come with their benefits. But knowing they are not approved by the law should tell you why you shouldn’t use them.