By Thuita Gatero, Managing Editor, Africa Digest News. He specializes in conversations around data centers, AI, cloud infrastructure, and energy.
Walk through any street in Nairobi today and you will see a quiet revolution in motion. From hawkers livestreaming on TikTok to boda boda riders managing orders on WhatsApp, everyone is online or at least trying to be.
But behind the glitter of digital inclusion, millions of Kenyans are financing smartphones they can barely afford through Buy Now, Pay Later (BNPL) plans.
On paper, it sounds like empowerment. Pay a small deposit, take the phone home, and clear the balance in daily or weekly installments. In reality, it is a trap disguised as convenience.
When a KSh 12,000($93) Phone Becomes a KSh 27,000($209) Debt…..that is a 125% increase. It is like renting a KSh 10,000 apartment , but because you want to “pay slowly,” the landlord raises it to KSh 22,000 per month. You would never agree to that, yet people do it daily for phones that lose half their value in a year. The phone does not appreciate, only your ignorance of compounding interest does.
Take a popular mid-range phone that retails at KSh 12,000. Under the Lipa mdogo mdogo plan, buyers pay a KSh 3,000 deposit, then clear the balance over several months.
But the catch lies in the interest and hidden fees. By the time the final installment is paid, the total cost can balloon to KSh 25,000–27,000 more than double the original retail price.
Now factor in depreciation: Electronics, especially smartphones depreciate rapidly. After 1 year, a phone typically loses 40% of its value. So, by the time a Lipa mdogo mdogo customer finishes paying for that KSh 12,000 phone, it may be worth barely KSh 5,000 even as they have paid over five times that amount. It’s not just poor math; it is a quiet form of financial bleeding.
This is where the moral question kicks in. Are these companies monetizing the demand for smartphones, or the lack of financial literacy?
According to the Central Bank of Kenya, about 40% of adults understand how interest rates, credit terms, or compound costs work. That ignorance is the business model. The average buyer does not calculate effective annual rates or compare total ownership costs, they calculate daily convenience.
“Fifty shillings a day” feels affordable. But fifty shillings a day for a year is over KSh 18,000, and that is before penalties, hidden fees, and late payment interest. By design, the system preys on how people feel about money, not how they understand it.
It is easy to romanticize BNPL as a bridge to digital inclusion and in some cases, it is. A smartphone opens doors: access to mobile money, online education, and work opportunities. But inclusion without education quickly turns into dependency.
We have seen this before. Kenya’s mobile loan boom started with the same promise, easy access, no collateral, instant approval. Within two years, millions were blacklisted by CRBs. BNPL is replaying the same song, this time with hardware.
Can BNPL Work in a Literate Economy?
In financially literate economies, Buy Now, Pay Later (BNPL) works because consumers read the fine print. They know that spreading a payment across 12 months means paying more and they compare alternatives.
They also earn stable incomes, so default risks are lower. In those markets, BNPL is a tool of convenience, not a trap of desperation.
But in Kenya, incomes fluctuate, and financial literacy remains low, students are using upkeep money being sent from the village, BNPL takes a darker shape. It becomes less of an “access tool” and more of a slow-motion debt trap.
Let us put it plainly. Turning a KSh 12,000 ($93) phone into a KSh 27,000 ($209) debt is a 125% increase. That’s not convenience, that is exploitation.
If Omondi understands interest rates, depreciation, and opportunity cost, would he ever agree to pay KSh 27,000 for a KSh 12,000 phone, the same gadget that begins losing value the moment he removes the seal? Of course not. He would rather save for two months, pay cash, and keep his peace. This is simply monetized illiteracy.
Why This Wouldn’t Work in a Literate Economy
Take credit cards, for example. In the U.S., the average interest rate is about 28.7% APR, according to Forbes. That sounds high, but it is annualized interest, spread over 12 months not an upfront 125% markup on the cost of the item.
There is also structure and transparency:
- Consumers are told their interest rate clearly.
- Most cards have a grace period, pay within it, and you owe zero interest.
- Regulations require disclosure of every fee.
- And defaults affect your credit score, a deterrent to reckless borrowing.
So yes, people in the U.S. or Europe use credit but usually to buy assets like homes, education, or business capital, not depreciating gadgets that lose half their value in a year. They borrow strategically because they understand how money grows and how debt compounds.
BNPL in Kenya thrives because most people do not calculate the true cost of convenience.
They see “KSh 2,500 per month” and think it is affordable, without realizing they will end up paying twice what the item is worth. In a literate economy, that model would not survive because informed consumers reject predatory math.
BNPL does not empower the financially literate. It feeds on those who do not yet understand the game. BNPL can be transformative but only in an ecosystem where financial education precedes access.
Kenya does not need to ban Lipa mdogo mdogo. It needs to regulate it, cap hidden charges, and mandate clear disclosure of total cost of ownership.
Otherwise, “digital inclusion” will keep breeding digital poverty where people own the tools of the future but finance them with the mistakes of the past.