Updated 27 October 2026
To find the true cost of a phone or appliance on Lipa Mdogo Mdogo, add the deposit to every instalment you will pay, then subtract the cash price. The gap is what credit costs you. A phone with a cash price of KSh 20,000, bought with a KSh 3,000 deposit and KSh 60 a day for a year, ends up costing KSh 24,900, which is KSh 4,900 more than cash. Because you repay daily, that works out to an annual interest rate of roughly 53%, far higher than the 24.5% it looks like at first glance.
The figures in this guide are round example numbers chosen to show the method. They are not any provider’s price. Use the same steps with the deposit, daily or weekly rate and term on the offer in front of you.
In this guide
- The Three Numbers You Need
- Step 1: Work Out the Total You Will Pay
- Step 2: Compare With the Cash Price
- Step 3: Find the Real Annual Rate
- Step 4: Count the Costs That Are Not in the Daily Rate
- The Save-Then-Buy Check
- How Instalments Compare With Other Credit
- Who Regulates These Plans
- Frequently Asked Questions
The Three Numbers You Need
- Cash price: what the same item costs if you pay in full today at a shop or online store.
- Deposit: the amount you pay upfront to take the item home.
- Instalment and term: the daily, weekly or monthly payment, and how many payments there are until you own the item.
Ask the seller for all three in writing, or take a screenshot of the provider’s own page. If a seller will only tell you the daily amount and not the term, do not sign.
Step 1: Work Out the Total You Will Pay
Total paid = deposit + (instalment x number of payments)
| Example plan | Deposit | Instalment | Payments | Total paid |
|---|---|---|---|---|
| A: daily for a year | KSh 3,000 | KSh 60 a day | 365 | KSh 24,900 |
| B: weekly for a year | KSh 3,000 | KSh 450 a week | 52 | KSh 26,400 |
| C: cheaper phone, daily | KSh 1,000 | KSh 30 a day | 365 | KSh 11,950 |
Step 2: Compare With the Cash Price
Extra cost = total paid minus cash price. Divide the extra cost by the cash price to get the markup.
| Example plan | Cash price | Total paid | Extra cost | Markup on cash price |
|---|---|---|---|---|
| A | KSh 20,000 | KSh 24,900 | KSh 4,900 | 24.5% |
| B | KSh 20,000 | KSh 26,400 | KSh 6,400 | 32.0% |
| C | KSh 10,000 | KSh 11,950 | KSh 1,950 | 19.5% |
Many people stop here. The markup is useful, but it understates the real cost of borrowing, for the reason below.
Step 3: Find the Real Annual Rate
In plan A you are not borrowing KSh 17,000 for a whole year. You start owing KSh 17,000 (the cash price minus the deposit) and pay some back every day, so on average you owe about half of it. Paying KSh 4,900 for the use of roughly KSh 8,500 over a year is far more expensive than it looks.
When we solve for the interest rate that turns 365 daily payments of KSh 60 into a loan of KSh 17,000, the answer is about 0.145% a day, or roughly 53% a year as a simple annual rate. Compounded, it is closer to 70%. Plan B, at KSh 450 a week, works out to roughly 67% a year as a simple annual rate. Plan C comes to about 40%.
| Example plan | Amount financed | Markup | Approximate annual rate (simple) |
|---|---|---|---|
| A | KSh 17,000 | 24.5% | About 53% |
| B | KSh 17,000 | 32.0% | About 67% |
| C | KSh 9,000 | 19.5% | About 40% |
A quick rule: if a plan is repaid evenly over its term, the real annual rate is close to double the simple “extra cost divided by amount financed” figure for a one-year plan. Use our bank loan calculators and Sacco loan calculators to compare the same amount borrowed from a bank or Sacco.
Step 4: Count the Costs That Are Not in the Daily Rate
- Missed-day penalties or extensions: some plans lock the device or extend the term when you miss payments. Read the terms for what a missed day costs.
- Insurance or activation fees: add any one-off charge to the deposit in Step 1.
- M-Pesa charges: check whether paying the provider’s paybill costs you a transaction fee. Over 365 payments, even a small fee adds up. Our M-KOPA paybill guide explains one provider’s payment route.
- Credit record: late payments can be reported to credit reference bureaus. check your CRB status before and after, and use the CRB help hub if a listing appears.
The Save-Then-Buy Check
Before signing, ask how long it would take to save the cash price if you put the instalment aside instead. At KSh 60 a day, KSh 20,000 takes 334 days, about a month less than plan A’s 365 days, and you would keep KSh 4,900. Saving into a money market fund such as the Ziidi money market fund would shorten the wait slightly through interest. Lipa Mdogo Mdogo makes sense when you need the item now to earn, such as a phone for a delivery job, and less sense for an upgrade you could wait for.
How Instalments Compare With Other Credit
If you are tempted to fund a phone with an overdraft or a loan app instead, compare the full cost the same way. Our guides to Fuliza charges, Fuliza vs M-Shwari and Tala show what short-term mobile credit costs, and Safaricom Faraja covers paying for goods on credit at the till.
Who Regulates These Plans
The Business Laws (Amendment) Act, 2024, brought “non-deposit taking credit providers” under the Central Bank of Kenya (CBK). It defines buy now pay later as buying goods and paying later in instalments, with or without interest, as determined by CBK, and also covers pay-as-you-go arrangements as CBK determines. Hire purchase under the Hire-Purchase Act is excluded. CBK’s Directory of Digital Credit Providers, updated September 29, 2026, lists 281 licensed firms, including Lipa Later Limited, M-Kopa Loan Kenya Limited, Watu Credit Ltd and Mogo Auto Limited. A company appearing in that directory holds a digital credit licence; it does not mean every product it sells is approved or cheap. Check names in our Verified Lender Tracker.
Background reading: Watu passing one million phones financed and the MPs’ probe into buy now pay later and asset lenders. If a provider harasses you over missed payments, here is how to report lender harassment.
Frequently Asked Questions
How do I calculate the total cost of a Lipa Mdogo Mdogo phone?
Add the deposit to the daily or weekly payment multiplied by the number of payments. Subtract the cash price to see the extra you pay.
Why is the real interest rate higher than the markup?
Because you repay as you go, you owe the full amount only at the start. On average you borrow about half of it, so the cost per shilling borrowed is roughly double.
Is Lipa Mdogo Mdogo always more expensive than cash?
Almost always, unless a plan is offered at the cash price with no fees. Compare the total paid with the cash price in a shop.
Is buy now pay later regulated in Kenya?
Yes. Since the Business Laws (Amendment) Act, 2024, CBK regulates non-deposit taking credit providers, including buy now pay later as it determines. Hire purchase is covered separately by the Hire-Purchase Act.
Worked examples use round example numbers to show the maths, not any provider’s price. Licence details checked in the Central Bank of Kenya Directory of Digital Credit Providers updated September 29, 2026; legal definitions from the Business Laws (Amendment) Act, 2024, checked October 25, 2026.
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