Banking has been around for a long time, as the history of banking would show. The whole works; safe keeping, lending and borrowing  existed long before large, corporate, daunting banks came into play. The only difference from what we know today as banking is that the banker back then had a face. He was human, and lived amongst his clients. He had a drink at the village den and probably - for Africa - went hunting with the rest of the folk. Then he would in the evening take excess stock and store it, and give it to the those who fall short, at an interest.

According to Business Time, When people get nostalgic about community banking, they evoke a time when your bank really knew who you were. The manager knew your name and the tellers would ask how your kids were doing, or wish you happy birthday. With the ascent of mega-banks and the growth of online and mobile banking, the idea of a hometown bank where your community ties mattered more than a bunch of cold calculations became as rare as cars with tail fins.

Micro-lending

As they say, necessity is the mother of invention but here, it is a case of necessity mothering re-invention. High interest rates from banks, strict requirements for security and tedious verification processes have led borrowers to seek short term small loans from informal sources rather than mainstream banking institutions.

In the past one or two years, downtown Nairobi has seen growth of hundreds of shops with signs "Loans on Items" posted on them.  These shops lend to customers short emergency loans on mostly phones, laptops and cars for a period not exceeding 30 days at minimum rates of 30% per week. This idea helps many solve emergencies, but 30% a week on KES 5000 for instance brings the amount payable at the end of 7 days to KES 6,500. That is a lot of money for an individual who needs loans worth KES 5,000.

Mobile Loans

Mobile telephony has been a blessing in Kenya over the years and many life changing innovations have been made on the mobile platform. One of these is mobile banking, money transfer and micro loan issuance. One such idea is M-Pepea, a micro lender that uses Safaricom's M-Pesa to lend short term emergency loans to customers.

M-Pepea gives instant loans of between KES 1,000 and KES 20,000 to borrowers with interests of between 5.7% and 20.5% on a repayment period of up to 30 days. Read more on M-Pepea.

Even Safaricom jumped in the action with M-Shwari, offering loans at 7.5%.

So Why Not Use Facebook?

A micro-lender in the United Stated, LendUp.com has gone back to when the banker was interested in the lives of his clients. Martha White of Business Times says back in the day, a bank manager would know how long their clients have lived in town, where they work, who their friends, cousins, parents, and even grandparents were.

LendUp, is exploring whether or not cutting-edge data-gathering and analytics tools can reach across the Internet and replicate the way old-school bankers used to consider customers’ community ties when doing business with them.

LendUp will use social media to verify information a borrower provides on their application for the short loan. If things like your current city of residence doesn’t match up with information you’ve provided or LendUp has acquired from another channel, that could be a red flag, as could frequent changes to your contact info. LendUp, according to Business Times, might eventually use social media data to cross-check the information borrowers provide about their education or employment histories.

Does your facebook or twitter profile define how stable and reliable you are? Well it might be useful too soon, should we have arrangements like LendUp here in Kenya. “What we’re looking at is the strength of your ability and your willingness to have longer-term cohesive social interactions,” LendUp CEO CEO Sasha Orloff is quoted by Business Times.

Details like how long you’ve had your account, how many friends you have, and how far away they are physically are some of the things LendUp will find useful in a borrowers social profile. “If you have a very strong, close geographic network, that’s helpful to you” because it shows the lender that you have a support network. The site also looks at how often you write about your friends and how often they communicate with you.
According to Orloff, the theory is that a thriving online social life is an indicator of stability, which somehow translates into a greater likelihood of paying off one’s debts. So maybe you would consider having a real social media life rather than Kale Kamsee and Dem MsuperWaDowntown.